A
Australia and New
N
Zea
aland Banking
B
Group Limitedd
ABN 11 005 35
57 522

H
Half Year
31 March 2015

Consolidatted Finanncial Rep
port
Dividendd Announcementtand Appendiix 4D

The
e Consolidated Financial Report and Dividend Announcemen t contains inform
mation required by Appendix 4D
D of the Australlian Securities
Excchange (ASX) L
Listing Rules. It should be read in conjunction w
with ANZ’s 2014
4 Annual Reporrt, and is lodgedd with the ASX underulisting rulee
4.2A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Name of Company:

APPENDIX 4D

Australia and New Zealand Banking Group Limited
ABN 11 005 357 522

Report for the half year ended 31 March 2015

Operating Results1

A$ million

Operating income



7%

to

10,230Net statutory profit attributable to shareholders



3%

to

3,506

Cash profit



5%

to

3,676

Dividends3

Cents
per
share

Franked4amountper share

86

100%

2

Proposed interim dividendRecord date for determining entitlements to the proposed 2015 interim dividend

12 May 2015

Payment date for the proposed 2015 interim dividend

1 July 2015

Dividend Reinvestment Plan and Bonus Option Plan
Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate inrespect of the 2015 interim dividend. For the 2015 interim dividend, ANZ intends to provide shares under the DRP and BOP through the issue of newshares. The 'Acquisition Price' to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference tothe arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the
ASX during the ten trading days commencing on 15 May 2015 (less a 1.5% discount), and then rounded to the nearest whole cent. Shares provided
under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting tocommence, cease or vary their participation in the DRP or BOP for the 2015 interim dividend must be received by ANZ's Share Registrar by 5.00pm(Australian Eastern Standard Time) on 13 May 2015. Subject to receiving effective contrary instructions from the shareholder, dividends payable toshareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted toPounds Sterling or New Zealand dollars respectively at an exchange rate calculated on 15 May 2015.

1
2

3
4

Unless otherwise noted, all comparisons are to the prior comparable period (half year ended 31 March 2014).
Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, which is provided to assist readers to understand the results for the ongoing activities of the Group.
The net after tax adjustment was an addition to statutory profit of $170 million made up of several items. Refer pages 85 to 92 for further details.
There is no foreign conduit income attributed to the dividends.
It is proposed that the interim dividend will be fully franked for Australian tax purposes (30% tax rate) and carry New Zealand imputation credits of NZD 10 cents per ordinary share.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4D
Half year ended 31 March 2015

CONTENTS

PAGE

Section 1 – Media release5

Section 2 – Snapshot

9

Section 3 – CEO overview

17

Section 4 – CFO overview

19

Section 5 – Segment review

47

Section 6 – Geographic review

77

Section 7 – Profit reconciliation

85

Section 8 – Condensed consolidated financial statements

93

Section 9 – Supplementary information

127

Definitions

141

ASX Appendix 4D Cross Reference Index

144

Alphabetical Index

145

This Consolidated Financial Report, Dividend Announcement and Appendix 4D has been prepared for Australia and New Zealand Banking Group Limited(the “Company” or “Parent Entity”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “the Bank”, “us”, “we” or“our”.
All amounts are in Australian dollars unless otherwise stated. The information on which the Condensed Consolidated Financial Statements are based has
been reviewed by the Group’s auditors, KPMG. The Company has a formally constituted Audit Committee of the Board of Directors. The signing of theCondensed Consolidated Financial Statements was approved by resolution of a Committee of the Board of Directors on 4 May 2015.
When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as
they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date hereof. ANZ does not undertake any obligation to publicly release the result of any revisions
to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDThis page has been left blank intentionally

ABN 11 005 357 522

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

For Release: 5 May 2015

Media Release
ANZ 2015 Half Year Result- good financial performance, investment priorities address more constrained environment Performance Highlights1• Statutory profit after tax of $3.5 billion up 3%. Cash profit2 of $3.7 billion up 5%.
• Interim Dividend 86 cents per share fully franked, earnings per share 133.6 cents both up 4%.
• Profit before provisions (PBP) up 4%.
• Customer deposits grew 12% with net loans and advances up 10%.
• Provision charge $510 million down 3%.
• Return on equity (RoE) 14.7%.
• Common Equity Tier 1 (CET1) ratio 8.7% on an Australian Prudential Regulation Authority (APRA) Basel 3
basis (CET1 ratio of 12.4% on an internationally comparable Basel 3 basis3).

OVERVIEWANZ Chief Executive Officer Mike Smith said: “This is a good well balanced financial performance with solid
progress made in reshaping our business in response to the more challenging macro-environment.
“Our domestic markets in Australia and New Zealand have again delivered strong growth and returns. We areinvesting heavily in areas of future profitability, particularly for our Australian business. This includes a focus on key
segments such as Home Lending and Commercial Banking in geographies and segments where we areunderweight such as New South Wales. New Zealand has again performed well following the businesssimplification program and brand merger, entrenching our position as New Zealand’s leading bank. Global Wealthachieved positive results and is delivering industry-leading innovation for our customers.
“International and Institutional Banking (IIB) performed well given the twin effects of expansionary monetary policy
on Institutional lending margins and lower commodity prices on trade volumes. These more difficult macro
conditions will be part of our operating environment for the foreseeable future. We are responding by increasing
the pace of execution of our Super Regional strategy within IIB so we continue to improve returns from thefranchise while benefiting from growth opportunities in Asia.
“Given our business mix, which includes a substantial Commercial and Institutional business portfolio, and themore constrained environment, ongoing investment is being made to position ANZ for the future. We are managing
expenses carefully, however, we have been prepared to accept a slightly higher run rate on costs in the short term
where investment can deliver sustainable growth and returns. We have directed those investments toward
customer technology platforms, growing our geographic foot print in both Australia and Asia, and more customerfacing bankers. These costs are being partly offset by further gains from enterprise simplification and efficiency inglobal operations and technology.
OUTLOOK“For the foreseeable future, we will be operating in a lower growth environment in which there will continue to beoccasional volatility and shocks. Nevertheless, the outlook for credit quality remains relatively benign supported by
low interest rates, the stimulus of a low oil price and an appreciating US Dollar. While China’s economic growth isslowing, this process is being well managed.
“This environment presents some challenges, however we are confident about the benefits of our Super Regional
strategy over the longer term and the opportunity to continue to improve financial performance in the near term,”
Mr Smith said.
DIVIDEND AND CAPITAL
A 4% increase in the Interim Dividend to 86 cents per share will see ANZ shareholders receive $2.4 billion, of
which around 73% will be delivered to Australian based Retail and Institutional investors. ANZ expects to maintaina payout ratio for the Financial Year 2015 towards the upper end of the 65 to 70% of Cash Profit range.
1 All comparisons are against the prior comparable period that is first half FY15 compared to first half FY14, not adjusted for FX and on a cash basis unless otherwise noted.
2 Statutory profit has been adjusted to exclude non-core items to arrive at Cash profit which measures the result for the ongoing activities of the Group.
3 Methodology per Australian Bankers’ Association International comparability of capital ratios of Australia’s major banks (August 2014).

5

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

ANZ’s Capital Ratio at the end of the first half was 8.7%, up 40 basis points (bps) on the same half in 20144. The
Group’s capital management strategy seeks to manage shareholder returns while funding growth andprogressively adjusting to any changes to regulatory capital requirements. The program considers both capitalefficiency and capital generation and has a variety of tools at its disposal to ensure ANZ remains well positioned.
This half the Dividend Reinvestment Plan will operate with a 1.5% discount which is expected to result in aparticipation ratio of around 20% on a full year basis. This level of participation is consistent with the average since2012 and our capital planning.
PERFORMANCE BY DIVISION5
AUSTRALIAThe Australia Division delivered another strong performance with profit growing 8%, driven by a 6% uplift in bothincome and PBP. There continues to be a compelling case for additional investment in Australia both in terms ofgrowth opportunities and returns. Reflecting this, investment spend was increased in the half, focused on initiatives
to enhance the digital platform, enlarge ANZ’s presence in New South Wales and build out our specialist
propositions in key sectors for our Corporate and Commercial business (C&CB) including Health and Emerging
Corporates.
Customer numbers, business volumes and market share all grew driven by investment in products, sales andservice capacity and capability. Additional staff and training, new and improved digital tools including online
applications, expanded customer coverage and improved service levels delivered increased Retail loan volumes,
up 8% and C&CB loan volumes, up 4%. Deposits increased 3% and 6% respectively. Home lending has now
grown above system for five consecutive years while maintaining prudent customer assessment criteria.
The C&CB Business delivered ongoing growth despite subdued business sector confidence. ANZ’s historicstrength in the Small Business Banking (SBB) segment continued with lending up 15% having grown at double
digit rates for the past 3 years. Deposits in SBB have also grown strongly and at $31 billion, are more than double
the level of loans.
INTERNATIONAL AND INSTITUTIONAL BANKING (IIB)
IIB increased profit by 7% with strong contributions from Global Markets customer sales and the CashManagement business along with ongoing benign credit outcomes. PBP increased by 1%. Geographically, Asia
Pacific Europe and America (APEA) was the standout, with profit up 18%.
ANZ’s customer franchise continues to strengthen, especially in Asia where customer revenues have increased
13%, largely through increased focus on lower capital intensity, higher return products like Foreign Exchange,
Cash Management and Debt Capital Markets. ANZ is also growing strongly in the region’s key trade andinvestment flow corridors including those between Australia and Hong Kong, China and Hong Kong and Australia
and Singapore.
In the Trade business while volumes were broadly maintained, deteriorating commodity prices reduced the value of
shipments, lowering income slightly. Lending growth across the network partially offset ongoing loan margincompression which is being felt most acutely in Australia. The quality of the loan book remains high, at 79%
investment grade. Deposits increased 17%, including a 27% increase in deposits in APEA. The percentage uplift in
both deposits and lending in part reflects the depreciation of the Australian Dollar during the period6.
A record Global Markets revenue result was in large part delivered via a record customer sales outcome, mostnotably in Asia. Increased activity particularly in rates, commodities and FX, assisted sales in the second quarter ofthe year.
NEW ZEALAND (all figures in NZD)The New Zealand business has increased momentum, with income growth of 6% coupled with disciplined costmanagement delivering an 8% PBP uplift. More buoyant consumer and business confidence has driven economic
activity and in turn lending volumes which ANZ’s market leading network has successfully leveraged. Profit growthof 1% reflected a lower level of provision write-backs than in the prior comparable period.
The ANZ brand in New Zealand is stronger than ever and together with improved digital options and service
delivery, this is growing customer numbers across our business. Home lending has increased 6%7 with market
share increasing in key regions like Auckland and Christchurch.
Streamlined products and processes along with digital tools to better enable our team in the field are delivering
great outcomes for our Commercial and Agri business with lending up 6%.

4 Capital ratio refers to ANZ’s Common Equity Tier 1 (CET1) ratio on an APRA Basel 3 basis.
5 All comparisons are against the prior comparable period that is first half FY15 compared to first half FY14, not adjusted for FX and on a cash basis unless otherwise noted.
6 IIB lending (NLA) grew 15% and Customer Deposits grew 17% PCP. On an FX adjusted basis lending (NLA) grew 4% and deposits grew 6%.
7 Refers to Home Lending for New Zealand Geography which includes Home Lending originated through Retail, Commercial and Global Wealth.

6

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

GLOBAL WEALTH
Profit for Global Wealth increased 11% driven by strong underlying performance from the Insurance business
which benefited from growth in in-force premiums, stable claims and improved lapse experience. Private Wealthand Funds Management experienced strong investment market performance and improved volumes with Funds
Under Management up 11% at the end of the half.
Global Wealth continues to focus on improving the customer experience and increasing penetration of the existingbank customer base, with wealth solutions increasingly integrated with the banking offer and more options for the
self-directed customers. The business now serves over 2.4 million customers across the region, managing morethan $68 billion in investment and retirement savings.
GLOBAL TECHNOLOGY, SERVICES AND OPERATIONS (GTSO)
ANZ’s ongoing investment in common platforms and modernisation of our IT infrastructure is enabling the Group toprocess record volumes while maintaining high service quality and operational efficiency.
The Group’s in-house regional delivery network is a source of ongoing competitive advantage for ANZ. It willcontinue to contribute to overall Group efficiency and customer satisfaction by enabling key business activity
transformation and delivery of productivity improvements while driving a more consistent, higher quality experiencefor our customers.
Operations costs across the Group declined a further 3% while absorbing around a 7% increase in operations
volumes.
CREDIT QUALITY
The total provision charge decreased 3% to $510 million reflecting ANZ’s long-term focus on asset quality andprudent credit standards along with relatively benign credit conditions, strong write-back and recovery outcomes
and lower levels of new and top-up provisions.
The Group total loss rate saw a modest decline over the year, from 21bps to 19bps and ANZ’s expectation is thatthe loss rate will stabilise in 2H15.
For media enquiries contact:
Paul Edwards
Group GM, Corporate Communications
Tel: +61-3-8654 9999 or +61-434-070101
Email: Paul.Edwards@anz.com

Stephen Ries
Head of Media Relations
Tel: +61-3-8654 3659 or +61-409-655551
Email: Stephen.Ries@anz.com

For investor and analyst enquiries contact:
Jill Craig
Group GM, Investor Relations
Tel: +61-3-8654 7749 or +61-412-047448
Email: Jill.Craig@anz.com

Cameron Davis
Executive Manager, Investor Relations
Tel: +61-3-8654 7716 or +61-421- 613819
Email: Cameron.Davis@anz.com

Video interviews with ANZ’s Chief Executive Officer Mike Smith and Chief Financial Officer Shayne Elliott regarding
today’s Half Year 2015 Financial Results announcement can be found at ANZ BlueNotes www.bluenotes.anz.com

7

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITEDABN 11 005 357 522

This page has been left blank intentionally8SNAPSHOTCONTENTS

Section 2 – Snapshot
Statutory Profit Results
Cash Profit Results
Key Balance Sheet Metrics
FX Adjusted - Cash Profit Results and Net Loans and Advances
Other Non-financial Information

9

SNAPSHOT
Statutory Profit Results
Movement1

Half Year
Mar 15$M
7,138

Net interest income

Sep 14$M
7,032

Mar 14$M
6,778

Mar 15v. Sep 142%

Mar 15v. Mar 14
5%

Other operating income

3,092

3,488

2,756

-11%

12%

Operating income

10,23010,520

9,534

-3%

7%

Operating expenses(4,593)(4,474)(4,286)

3%

7%

Profit before credit impairment and income tax

5,637

6,046

5,248

-7%

7%

Credit impairment charge

(494)

(459)

(527)

8%

-6%

Profit before income tax

5,143

5,587

4,721

-8%

9%

Income tax expense(1,629)(1,702)(1,323)

-4%

23%

(8)

(6)

(6)

33%

33%

3,506

3,879

3,392

-10%

3%

Non-controlling interests
Profit attributable to shareholders of the Company
Earnings per ordinary share (cents)

Movement

Half Year

Basic

Reference
Page
105

Mar 15128.0

Sep 14142.3

Mar 14
124.8

Mar 15v. Sep 14-10%

Mar 15v. Mar 14
3%

Diluted

105

124.6

136.5

120.6

-9%

3%

Half Year
Reference
Page

Mar 15

Sep 14

Mar 14

Ordinary share dividends (cents)
Interim - 100% franked2

104

86

n/a

83

Final - 100% franked2

104

n/a

95

n/a

Total - 100% franked

2

Ordinary share dividend payout ratio3
Preference share dividend ($M)
Dividend paid4

104

86

95

83

104

67.9%

67.6%

67.2%

104

1

3

3

Profitability ratios
Return on average ordinary shareholders' equity5

14.0%

16.6%

15.0%

Return on average assets

0.85%

1.01%

0.93%

Net interest margin

2.04%

2.12%

2.15%

44.9%

42.5%

45.0%

1.11%

1.17%

1.17%

439

540

601

55

(81)

(74)

494

459

527

Individual credit impairment charge as a % of average gross loans & advances

0.16%

0.20%

0.24%

Total credit impairment charge as a % of average gross loans & advances

0.18%

0.17%

0.21%

Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets
Credit impairment charge/(release)
Individual credit impairment charge ($M)
Collective credit impairment charge/(release) ($M)
Total credit impairment charge ($M)

1.
2.

3.
4.

5.

107

The half-on-half results are impacted by seasonal variability such as the number of days in the half and seasonal related impacts on product sales and profitability.
Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZD 10 cents per ordinary share for the proposed 2015 interim dividend (2014 final dividend: NZD
12 cents; 2014 interim dividend: NZD 10 cents).
Dividend payout ratio is calculated using the proposed 2015 interim, 2014 final and 2014 interim dividends.
Represents dividends paid on Euro Trust Securities (preference shares) issued on 13 December 2004. The Euro Trust Securities were bought back by ANZ for cash at face value andcancelled on 15 December 2014.
Average ordinary shareholders’ equity excludes non-controlling interests and preference shares.

10

SNAPSHOT
1

Cash Profit Results

Movement2

Half Year
Mar 15$M
7,138

Sep 14$M
7,033

Mar 14$M
6,764

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
6%

Other operating income

3,047

2,877

2,904

6%

5%

Operating income

10,185

9,910

9,668

3%

5%

Operating expenses(4,593)(4,474)(4,286)

3%

7%

Profit before credit impairment and income tax

5,592

5,436

5,382

3%

4%

Net interest income

Credit impairment charge

(510)

(461)

(528)

11%

-3%

Profit before income tax

5,082

4,975

4,854

2%

5%

Income tax expense(1,398)(1,367)(1,333)

2%

5%

(8)

(6)

(6)

33%

33%

3,676

3,602

3,515

2%

5%

Non-controlling interests
Cash profit
Earnings per ordinary share (cents)

Half Year
Reference
Page

Basic
Diluted34
34

Movement

Mar 15133.6

Sep 14
131.5

Mar 14
128.7

Mar 15v. Sep 142%

Mar 15v. Mar 14
4%

129.9

126.5

124.3

3%

5%

Half Year

Ordinary share dividends (cents)
Ordinary share dividend payout ratio3

Reference
Page

Mar 15

Sep 14

Mar 14

35

64.7%

72.8%

64.9%

14.7%

15.3%

15.5%

0.89%

0.94%

0.96%

Profitability ratios
Return on average ordinary shareholders' equity4
Return on average assets
Net interest margin

23

Profit per average FTE ($)
Efficiency ratios
Operating expenses to operating income
Operating expenses to average assets
Credit impairment charge/(release)
Individual credit impairment charge ($M)

2.04%

2.12%

2.15%

72,382

71,90670,500

45.1%

45.1%

44.3%

1.11%

1.17%

1.17%

602

29

455

542

Collective credit impairment charge/(release) ($M)

30

55

(81)

(74)

Total credit impairment charge ($M)

29

510

461

528

Individual credit impairment charge as a % of average gross loans & advances

0.17%

0.20%

0.24%

Total credit impairment charge as a % of average gross loans & advances

0.19%

0.17%

0.21%

Cash profit by division/geography

Half Year

Movement

Australia

Mar 15$M
1,602

Sep 14$M
1,571

Mar 14$M
1,483

Mar 15v. Sep 142%

Mar 15v. Mar 14
8%

International and Institutional Banking

7%

1,459

1,335

1,368

9%

New Zealand

566

528

550

7%

3%

Global Wealth

259

308

234

-16%

11%

GTSO and Group Centre

(210)

(140)

(120)

50%

75%

Cash profit by division

3,676

3,602

3,515

2%

5%

Australia

6%

2,147

2,337

2,025

-8%

Asia Pacific, Europe & America

743

535

681

39%

9%

New Zealand

786

730

809

8%

-3%

3,676

3,602

3,515

2%

5%

Cash profit by geography
1.

2.
3.
4.

Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, which is provided to assist readers to understand the result for the ongoing business activities of theGroup. Refer to page 85 for the reconciliation between statutory and cash profit.
The half-on-half results are impacted by seasonal variability such as the number of days in the half and seasonal related impacts on product sales and profitability.
Dividend payout ratio is calculated using the proposed 2015 interim, 2014 final and 2014 interim dividends.
Average ordinary shareholders’ equity excludes non-controlling interests and preference shares.

11

SNAPSHOTKey Balance Sheet Metrics
As at
Reference
Page

Mar 15

Sep 14

Movement

Mar 14

Mar 15v. Sep 14

Mar 15v. Mar 14

Capital adequacy
Common Equity Tier 1- APRA Basel 3

40

8.7%

8.8%

8.3%

- Internationally Comparable Basel 31

40

12.4%

12.7%

12.2%

Credit risk weighted assets ($B)

130

339.7

308.9

305.3

10%

11%

Total risk weighted assets ($B)

130

386.9

361.5

360.7

7%

7%

Balance Sheet: Key Items
Gross loans & advances ($B)

562.2

525.7

513.6

7%

9%

Net loans & advances ($B)

558.2

521.8

509.3

7%

10%

Total assets ($B)

860.1

772.1

737.8

11%

17%

Customer deposits ($B)

436.1

403.7

388.0

8%

12%

Total equity ($B)

52.1

49.3

47.0

6%

11%

Liquidity Coverage Ratio2

119%

111%

92%

2,708

2,889

3,620

-6%

-25%

0.48%

0.55%

0.70%

1,594

1,713

2,150

-7%

-26%

3.1%

3.5%

4.6%
-5%

-24%

6%

2%

Impaired assets
Gross impaired assets ($M)

31

Gross impaired assets as a % of gross loans & advances
Net impaired assets ($M)

31

Net impaired assets as a % of shareholders' equity
Individual provision ($M)

107

Individual provision as a % of gross impaired assets
Collective provision ($M)

107Collective provision as a % of credit risk weighted assets

1,114

1,176

1,470

41.1%

40.7%

40.6%

2,914

2,757

2,843

0.86%

0.89%

0.93%

Net Assets
Net tangible assets attributable to ordinary shareholders ($B)

43.6

40.4

38.1

8%

14%

Net tangible assets per ordinary share ($)

15.75

14.65

13.90

8%

13%

1.
2.

See page 41 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.
March 2014 Liquidity Coverage Ratio is presented on a best endeavours basis.

As at

Net loans and advances by division/geography

Movement

Australia

Mar 15$B
297.6

Sep 14$B
287.7

Mar 14$B
278.1

Mar 15v. Sep 14
3%

Mar 15v. Mar 14
7%

International and Institutional Banking

156.5

142.0

136.5

10%

15%

New Zealand

97.7

86.1

88.2

13%

11%

Global Wealth

6.9

6.4

6.0

8%

15%

GTSO and Group Centre

(0.5)

(0.4)

0.5

25%

large

Net loans and advances by division

558.2

521.8

509.3

7%

10%

Australia

362.8

348.6

336.5

4%

8%

Asia Pacific, Europe & America

88.4

79.2

76.6

12%

15%

New Zealand

107.0

94.0

96.2

14%

11%

Net loans and advances by geography

558.2

521.8

509.3

7%

10%

12

SNAPSHOTFX Adjusted – Cash Profit Results and Net Loans and Advances
The following tables present the Group’s cash profit results and net loans and advances neutralised for the impact of foreign exchange movements.
Comparative data has been adjusted to remove the translation impact of foreign exchange movements by retranslating prior period comparatives atcurrent period foreign exchange rates.

Cash Profit - March 2015 Half Year vs March 2014 Half Year
Half YearNet interest income

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjustedMar 15$M
7,138

Mar 14$M
6,764

Mar 14$M
110

Mar 14$M
6,874

Mar 15v. Mar 14
6%

Mar 15v. Mar 14
2%

Mar 15v. Mar 14
4%

Other operating income

3,047

2,904

92

2,996

5%

3%

2%

Operating income

10,185

9,668

202

9,870

5%

2%

3%

Operating expenses(4,593)(4,286)(113)(4,399)

7%

3%

4%

Profit before credit impairment and income tax

5,592

5,382

89

5,471

4%

2%

2%

Credit impairment charge

(510)

(528)

(9)

(537)

-3%

2%

-5%

Profit before income tax

5,082

4,854

80

4,934

5%

2%

3%

Income tax expense(1,398)(1,333)(19)(1,352)

5%

2%

3%

(8)

(6)

(1)

(7)

33%

19%

14%

3,676

3,515

60

3,575

5%

2%

3%

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 15$M
1,602

Mar 14$M
1,483

Mar 14$M-

Mar 14$M
1,483

Mar 15v. Mar 14
8%

Mar 15v. Mar 14
0%

Mar 15v. Mar 14
8%

International and Institutional Banking

Non-controlling interests
Cash profit

Cash Profit by Division and Geography - March 2015 Half Year vs March 2014 Half Year
Half Year

Movement

1,459

1,368

49

1,417

7%

4%

3%

New Zealand

566

550

14

564

3%

3%

0%

Global Wealth

259

234

3

237

11%

2%

9%

GTSO and Group Centre

(210)

(120)

(6)

(126)

75%

8%

67%

Cash profit by division

3,676

3,515

60

3,575

5%

2%

3%

Australia

2,147

2,025

(11)

2,014

6%

-1%

7%

743

681

51

732

9%

7%

2%

Asia Pacific, Europe & America
New Zealand
Cash profit by geography

786

809

20

829

-3%

2%

-5%

3,676

3,515

60

3,575

5%

2%

3%

Net loans and advances by division and geography - March 2015 Half Year vs March 2014 Half YearAs at

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 15$B
297.6

Mar 14$B
278.1

Mar 14$B-

Mar 14$B
278.1

Mar 15v. Mar 14
7%

Mar 15v. Mar 14
0%

Mar 15v. Mar 14
7%

International and Institutional Banking

156.5

136.5

14.4

150.9

15%

11%

4%

New Zealand

97.7

88.2

4.2

92.4

11%

5%

6%

Global Wealth

6.9

6.0

0.5

6.5

15%

9%

6%

GTSO and Group Centre

(0.5)

0.5

(0.1)

0.4

large

large

large

Net loans and advances by division

558.2

509.3

19.0

528.3

10%

4%

6%

Australia

362.8

336.5

-

336.5

8%

0%

8%

Asia Pacific, Europe & America

88.4

76.6

14.5

91.1

15%

18%

-3%

New Zealand

107.0

96.2

4.5

100.7

11%

5%

6%

Net loans and advances by geography

558.2

509.3

19.0

528.3

10%

4%

6%

13

SNAPSHOTFX Adjusted – Cash Profit Results and Net Loans and Advances (cont’d)
The following tables present the Group’s cash profit results and net loans and advances neutralised for the impact of foreign exchange movements.
Comparative data has been adjusted to remove the translation impact of foreign exchange movements by retranslating prior period comparatives atcurrent period foreign exchange rates.

Cash Profit - March 2015 Half Year vs September 2014 Half Year
Half YearNet interest income

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjustedMar 15$M
7,138

Sep 14$M
7,033

Sep 14$M123

Sep 14$M
7,156

Mar 15v. Sep 14
1%

Mar 15v. Sep 14
1%

Mar 15v. Sep 14
0%

Other operating income

3,047

2,877

96

2,973

6%

4%

2%

Operating income

10,185

9,910

219

10,1293%

2%

1%Operating expenses(4,593)(4,474)(134)(4,608)

3%

3%

0%

Profit before credit impairment and income tax

5,592

5,436

85

5,521

3%

2%

1%

Credit impairment charge

(510)

(461)

(4)

(465)

11%

1%

10%

Profit before income tax

5,082

4,975

81

5,056

2%

1%

1%

Income tax expense(1,398)(1,367)(21)(1,388)

2%

1%

1%

(8)

(6)

(1)

(7)

33%

19%

14%

3,676

3,602

59

3,661

2%

2%

0%

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 15$M
1,602

Sep 14$M
1,571

Sep 14$M-

Sep 14$M
1,571

Mar 15v. Sep 142%

Mar 15v. Sep 14
0%

Mar 15v. Sep 14
2%

International and Institutional Banking

1,459

1,335

58

1,393

9%

4%

5%

566

528

10

538

7%

2%

5%

Non-controlling interests
Cash profit

Cash Profit by Division and Geography - March 2015 Half Year vs September 2014 Half Year
Half Year

New Zealand

Movement

Global Wealth

259

308

1

309

-16%

0%

-16%

GTSO and Group Centre

(210)

(140)

(10)

(150)

50%

10%

40%

Cash profit by division

3,676

3,602

59

3,661

2%

2%

0%

Australia

2,147

2,337

(8)

2,329

-8%

0%

-8%

743

535

53

588

39%

13%

26%

Asia Pacific, Europe & America
New Zealand
Cash profit by geography

786

730

14

744

8%

2%

6%

3,676

3,602

59

3,661

2%

2%

0%

Net loans and advances by division and geography - March 2015 Half Year vs September 2014 Half YearAs at

Movement

ActualFX
unadjusted

FX
impactFX
adjusted

FX
unadjusted

FX
impactFX
adjusted

Australia

Mar 15$B
297.6

Sep 14$B
287.7

Sep 14$B-

Sep 14$B
287.7

Mar 15v. Sep 14
3%

Mar 15v. Sep 14
0%

Mar 15v. Sep 14
3%

International and Institutional Banking

156.5

142.0

10.8

152.8

10%

8%

2%

New Zealand

97.7

86.1

8.7

94.8

13%

10%

3%

Global Wealth

6.9

6.4

0.4

6.8

8%

7%

1%

GTSO and Group Centre

(0.5)

(0.4)

-

(0.4)

25%

0%

25%

Net loans and advances by division

558.2

521.8

19.9

541.7

7%

4%

3%

Australia

362.8

348.6

-

348.6

4%

0%

4%

Asia Pacific, Europe & America

88.4

79.2

10.4

89.6

12%

13%

-1%

New Zealand

107.0

94.0

9.5

103.5

14%

11%

3%

Net loans and advances by geography

558.2

521.8

19.9

541.7

7%

4%

3%

14

SNAPSHOT

Other Non-Financial Information
As at

Movement
Mar 15v. Sep 14

Mar 15v. Mar 14

Mar 15

Sep 14

Mar 14

51,24350,32849,850

2%

3%

16.8

15.3

14.8

10%

14%

Full time equivalent staff information
Full time equivalent staff (FTE)
Assets per FTE ($M)

Half Year

Movement

Mar 15

Sep 14

Mar 14

Mar 15v. Sep 14

Mar 15v. Mar 14- high$37.19$35.07$34.06

6%

9%

- low

$32.15$30.47$28.846%

11%- closing

Shareholder value - ordinary shares
Share price$36.64$30.92$33.0618%

11%

Market capitalisation of ordinary shares ($B)

101.3

85.2

90.7

19%

12%

Total shareholder returns (TSR)

19.9%

-4.1%

10.4%

As at Mar 15
Credit Ratings

Short-Term Long-Term

Outlook

Moody's Investor Services

P-1

Aa2

StableStandard & Poor's

A-1+

AA-

StableFitch Ratings

F1+

AA-

Stable15

SNAPSHOTThis page has been left blank intentionally16CEO OVERVIEWCEO Overview1
Strategy and Performance
ANZ is building the best connected, most respected bank across the Asia Pacific region to provide shareholders with above-peer earnings growth.
The Super Regional strategy is comprised of three key elements – strong domestic businesses in Australia & New Zealand, profitable Asian growth andan enterprise wide approach to operations and technology. ANZ is particularly focused on the significant organic growth opportunities which exist within
the Asia Pacific region, and our distinctive Asia Pacific footprint sees us well positioned to meet the needs of customers who are dependent on regional
capital, trade and wealth flows.
At the half, our differentiated strategy delivered a 5% increase in cash profit to $3.7 billion, with a Return on Equity of 14.7%, earnings per share of 133.6
cents and a fully-franked dividend of 86 cents per share. The Common Equity Tier 1 ratio on an APRA basis was 8.7% at the end of March, which
equates to 12.4% on an Internationally Comparable Basel 3 basis. The Group aims to have 25-30% of revenue derived from outside of Australia and New
Zealand by the end of FY2017 and at the half 25% of revenue was from APEA or APEA derived2.
While ANZ continues to pursue organic growth aspirations in the region, we have a clear strategy in place to leverage the scale in our business such that
returns also improve over time, and so ANZ advised the market at the FY13 result of an aspiration to lift Group RoE to 16% by the end of FY16 in partdriven by improving returns in Asia Pacific but also through driving greater capital efficiency and productivity across the company.
Strategic Progress
Global macro conditions remain challenging characterised by low levels of corporate lending demand, excess liquidity and depressed commodity prices.
At the same time these conditions are supporting benign credit quality outcomes. Growth in the Asia Pacific region is however still expected to be morerobust than other regions. While macro conditions impact the banking sector as a whole, broadly they have a more pronounced impact on Institutional
Banking businesses.
ANZ’s view is that market conditions are unlikely to change in the near term and so a greater focus is required by the banking sector on both productivity
and capital management. A number of initiatives have been put in place to drive improvements in both measures in order to deliver steady improvement
in both our cost and capital position over time.
•

We have continued to strengthen our businesses in our home markets, with the Australia and New Zealand Divisions achieving further gains in
productivity and market share, and further penetration of Wealth products into our existing customer base in these markets.

•

In IIB, growth in Asia Pacific continues with profit from APEA increasing 18%. Revenue has consistently grown at double digit rates with the
cumulative annual growth rate over the last 5 years standing at 19%. The Division’s revenue mix has diversified substantially over the past five
years with more significant contributions emerging from more capital efficient products like Foreign Exchange, Cash Management and Debt CapitalMarkets.

•

ANZ’s in-house regional delivery network is a source of ongoing competitive advantage for ANZ. The network is enabling the transformation of key
business activities and delivery of productivity improvements while driving a more consistent, higher quality experience for our customers. The
regional delivery centres provide full service regional coverage across our operating time zones helping to drive lower unit costs, improve quality
and lower risk. We have been selectively building out common platforms to enable our regional delivery and deliver a faster, easier more consistentcustomer experience. Outcomes are positively impacting across the Group; for the third year in a row first half operations volumes increased while
operations costs fell. A number of single day retail activity records were set last year in areas such as loan settlements, mobile banking logons,
merchant payment transactions and ATM transactions and the simplification program saw over 5000 business applications were decommissioned.

•

Organic capital generation of $2.1 billion coupled with the Group’s ongoing focus on capital efficiency saw ANZ’s capital ratio sit at 8.7% on an
Australian Prudential Regulation Authority (APRA) Basel 3 Common Equity Tier 1 (CET1) basis and 12.4% on an internationally comparable Basel
3 CET1 basis3.

•

The Group total loss rate saw a modest decline from 21bps to 19bps and ANZ’s expectation is that the loss rate will stabilise in 2H15. Gross
impaired assets reduced by a further 25% and have now reduced at an average of $498 million each half since 2012.

Medium to Long Term Strategic Goals
ANZ is committed to delivering strong total shareholder returns and above-peer earnings growth over the business cycle, targeting a Group cost to
income ratio below 43% and return on equity above 16% by the end of FY2016. The target dividend payout ratio remains at 65-70% of cash profit, which
we believe to be sustainable in a Basel 3 environment. To do this we will continue to:•Strengthen our position in our core markets of Australia and New Zealand by growing our Retail and Commercial operations, driving productivity
benefits, leveraging our super regional strategy and using technology to drive better functionality.
o

In Australia, we are transforming the way we serve our customers by investing in physical, mobile and digital channels to support our
retail customers, by increasing sales capacity to support our business banking customers, and by investing in customer analytics.

o

In New Zealand, we are now working under one brand and on one technology platform and have far more efficient market coverage.

•

Focus our Asian expansion primarily on Institutional Banking, supporting our Australian and New Zealand customers, targeting profitable markets
and segments in which we have expertise and which are connected through trade and capital flows.

•

Achieve greater efficiency and control through the use of scalable common infrastructure and platforms.

•

Maintain strong liquidity and actively manage capital to enhance ROE.

•

Build on our Super Regional capabilities – utilising our management bench-strength and continuing to deepen our international talent pool.

•

Apply strict criteria when reviewing existing investment and new inorganic opportunities.

1
2
3

The CEO Overview is reported on a cash basis. All comparisons are relative to the prior comparable period – half year to March 31 2015 compared to half year to March 31 2014, unless
APEA derived revenue represents income generated in Australia & New Zealand as a result of referral from ANZ’s APEA network.
See page 41 for further details regarding differences between APRA Basel 3 and Internationally Comparable Basel 3 Standards.

17

otherwise noted

CEO OVERVIEWThis page has been left blank intentionally18

CFO OVERVIEWCONTENTS

Section 4 – CFO Overview
Cash profit
Divisional performance
Review of Group results
Income and expenses
Credit risk
Income tax expense
Impact of exchange rate movements/revenue hedges
Earnings per share
Dividends
Economic profit
Condensed balance sheet
Liquidity risk
Capital management
Other regulatory developments
Investment spend
Software capitalisation

19

CFO OVERVIEW
Non-IFRS information
The Group provides additional measures of performance in the Results Announcement which are prepared on a basis other than in accordance withaccounting standards. The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide RG230 has been followed
when presenting this information.

Cash profit
Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, which is provided to assist readers in understanding the results forthe ongoing business activities of the Group. The adjustments made in arriving at cash profit are included in statutory profit which is subject to review
within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review by theexternal auditor, however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis
across each period presented.

The CFO Overview is reported on a cash basis.
Half Year
Mar 15$M
3,506

Statutory profit attributable to shareholders of the Company
Adjustments between statutory profit and cash profit1
Cash Profit

Sep 14$M
3,879

Movement
Mar 14$M
3,392

Mar 15v. Sep 14-10%

Mar 15v. Mar 14
3%

170

(277)

123

large

38%

3,676

3,602

3,515

2%

5%

Half Year

Adjustments between statutory profit
and cash profit1
Treasury shares adjustments
Revaluation of policy liabilities

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

79

(13)

37

large

large

(67)

(23)

(3)

large

large

Economic hedges

(14)

(150)

78

-91%

large

Revenue and net investment hedges

176

(119)

18

large

large

Structured credit intermediation trades

(4)

28

(7)

large

-43%

170

(277)

123

large

38%

Total adjustments between
statutory profit and cash profit1
1.

Movement

Refer to pages 85 to 92 for analysis of the reconciliation of statutory profit to cash profit.

Half Year

Cash Profit

Movement

Mar 15$M
7,138

Sep 14$M
7,033

Mar 14$M
6,764

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
6%

Other operating income

3,047

2,877

2,904

6%

5%

Operating income

10,185

9,910

9,668

3%

5%

Operating expenses(4,593)(4,474)(4,286)

3%

7%

Profit before credit impairment and income tax

5,592

5,436

5,382

3%

4%

Credit impairment charge

(510)

(461)

(528)

11%

-3%
5%

Net interest income

Profit before income tax

5,082

4,975

4,854

2%

Income tax expense(1,398)(1,367)(1,333)

2%

5%

(8)

(6)

(6)

33%

33%

3,676

3,602

3,515

2%

5%

Non-controlling interests
Cash profit
Refer to page 33 for the impact of exchange rates and revenue hedges on cash profit.

20

CF
FO OVERVIEW
W

Div
visional performmance
Half Year

Movement

sh profit by divis
sion
Cas
Aus
stralia

Mar 15
$M
M
1,602
2

Sep 14$M
1,571

Mar 14$M
1,483

Mar 15v.
v Sep 142%

Mar 15v. Mar 14
8%

Inte
ernational and Insttitutional Banking

7%

1,459
9

1,335

1,368

9%

New
w Zealand

566
6

528

550

7%

3%

Global Wealth

259
9

308

234

-16%

11%

GTS
SO and Group Ce
entre

(210
0)

(140)

(120)

50%

75%

Cas
sh profit/(loss)

3,676
6

3,602

3,515

2%

5%

Cas
sh profit by diviision – March 20
015 Half Year v March 2014 Ha lf YearMarch 2015 v M
March 2014
Australia•

eased $119 millio
on (8%) primarily
y due to a $225 m
million (7%) increease in net intere
est income on thee back of strong volume growth andaProfit incre
disciplined
d deposit pricing in Home Loans, Cards and Smalll Business Bank
king, partially offs
set by a $77 millioon (5%) increasee in operating
expenses driven primarily by investment in the Banking on Australia program.

International and Institutional Banking•

Profit incre
eased $91 millionn (7%) with $49 millionmdue to forreign exchange translation. Opera
ating income incr
creased $164 million (5%) driven by
volume groowth in Global Transaction Banking, higher invesstment and insura
ance income in RetailR
Asia Pacifiic and improved operating income
e in
the Asia P
Partnerships. Creedit impairment charges reduced by $64 million. These
T
increases werewpartially offfset by an increase in operating
expenses of $144 million (9%) due to inve
estment in key inffrastructure projeects.

New Zealand•eased $16 millionn (3%) with $14 millionmdue to forreign exchange translation. Opera
ating income incr
creased $101 million (8%) driven by
Profit incre
above sysstem growth in lending and a 3 bp
ps increase in neet interest marginn. These increase
es were partially offset by an increase in credit
impairmen
nt charges of $53
3 million due to a collective provission release in th
he March 2014 ha
alf.

Global Wealth•Profit incre
eased $25 millionn (11%) primarily
y driven by the peerformance of the Funds Manage
ement and Insuraance businesses
s. Funds
management operating inccome increased $12$ million (4%) based on strong
g performance in investment markkets. Insurance operatingoincomeeincreased $62 million (23%%) primarily due tot improved laps e experience as well as a non-recurring $47 millioon loss associate
ed with the exit ofo agroup life insurance plan inn the March 2014
4 half. In additionn, Corporate andd Other decreased $32 million duee to the resolutio
on of an insurancce
settlementt in New Zealandd in the March 20
014 half.

GTSO and Gro
oup Centre•Net loss inncreased $90 milllion (75%) with $6$ million due to foreign exchangge translation. Op
perating income ddecreased $31 millionmdue to neww
RBA Committed Liquidity FacilityF
fees and higher foreign cuurrency hedge loosses (which offset foreign currenncy gains elsewh
here in the Groupp).
Operating expenses increa
ased $55 million (30%) from increeased investmen
nt in enterprise prrojects, higher deepreciation and amortisationaas wellw
as investm
ment in the Globaal Compliance function.

March 2015 v S
September 2014
4
Australia•

Profit incre
eased $31 millionn (2%) primarily due
d to a $38 milllion (1%) increas
se in net interest income and a $221 million decrea
ase in credit
impairmen
nt charges, partia
ally offset by a $2
20 million (1%) inncrease in operating expenses duue to investmentt spend. The 1% increase in net

21

CFO OVERVIEW
interest income was driven by strong growth in Home Loans, Cards, Retail Deposits and Small Business Banking, partially offset by a 4 bps
contraction in net interest margin.
International and Institutional Banking•

Profit increased $124 million (9%) with $58 million due to foreign exchange translation. Operating income increased $303 million (9%) driven bystronger customer flow in Global Markets due to increased FX and Interest rate volatility, volume growth in Global Transaction Banking, higher
investment and insurance income in Retail Asia Pacific and improved operating income in the Asia Partnerships. These increases were partially
offset by an increase in operating expenses of $116 million (7%) due to investment in key infrastructure projects. Credit impairment charges
increased $44 million due to increased individual impairment charges as well as collective provision releases in the September 2014 half from
improved customer credit ratings.

New Zealand•Profit increased $38 million (7%) with $10 million due to foreign exchange translation. Operating income increased $67 million (5%) driven bystrong lending growth and a 3 bps increase in net interest margin despite intense lending competition. These increases were partially offset by
an increase in operating expenses of $21 million (4%) driven by investments to support growth initiatives and inflationary impacts.

Global Wealth•Profit decreased $49 million (-16%) primarily driven by the non-recurring $125 million gain on the sale of ANZ Trustees and associatedspending on initiatives in the September 2014 half, partially offset by the strong performance of the Funds Management and Insurance
businesses. Funds management operating income increased $17 million (6%) driven by market performance and stable netflows. Insurance
operating income increased $25 million (8%) driven by solid in-force premium growth and improved claims experience.

GTSO and Group Centre•

Net loss increased $70 million (50%) with $10 million due to foreign exchange translation. Operating income decreased by $56 million due to
new RBA Committed Liquidity Facility fees and higher foreign currency hedge losses (which offset translation gains elsewhere in the Group). In
addition, credit impairment charges increased $33 million due to the release of an economic cycle provision in the September 2014 half.

Refer to Section 5 – Segment Review on pages 47 to 75 for further details.

22

CF
FO OVERVIEW
W
view of Group results
Rev
Income and expen
nses
Nett interest incomme
Half Year

Movement

Mar 15$M
7,138

Sep 14$M
7,033

Mar 14$M
6,764

Mar 15v. Sep 14
1%

Mar 15
v. Ma
ar 14
6%

Ave
erage interest earnning assets

703,369

661,5156632,400

6%

1
11%

Ave
erage deposit and other borrowings

oup
Gro
Cas
sh net interest incoome

551,805

517,1784498,484

7%

1
11%

Nett interest margin (%%) - cash

2.04

2.12

2.15

-8 bps-11 bpsGro
oup (excluding G
Global Markets)Cas
sh net interest inco
ome

6,633

6,498

6,256

2%

6%

Ave
erage interest earnning assets

530,606

509,2844492,600

4%

8%

Ave
erage deposit and other borrowings

420,878

394,661

3381,118

7%

1
10%

2.51

2.54

2.55

-3 bps-4 bpsNett interest margin (%%) - cash

Half Year
Mar 15$M

sh net interest mmargin by major division
d
Cas
Aus
straliaNet
N interest margin (%)

Sep 14$M

Movement
Mar 14$M

Mar 15v. Sep 14

Mar 15
v. Ma
ar 14

2.50

2.54

2.50

-4 bps0 bps

AverageAinterest eearning assets

294,368

284,759

2276,621

3%

6%

AverageA
deposit aand other borrowin
ngs

162,688

157,756

1155,073

3%

5%

ernational and Insttitutional Banking
InteNet
N interest margin (%)

1.34

1.46

1.55

-12 bps-21 bps

AverageAinterest eearning assets

304,429

275,656

2258,353

10%

1
18%

AverageA
deposit aand other borrowin
ngs

244,050

226,4092216,303

8%

1
13%

3 bps

New
w ZealandNet
N interest margin (%)

2.52

2.49

2.49

3 bps

AverageAinterest eearning assets

92,39588,54985,864

4%

8%

AverageA
deposit aand other borrowin
ngs

62,31457,18054,516

9%

1
14%

Gro
oup net interestt margin – March 2015 Half Yea
ar v March 2014 Half YearMarch 2015 v M
March 2014
Net interest mmargin (-11 bps)•

Asset mixx and funding mixx (-1 bp): adverse
e asset mix fromm an increased prroportion of Home Loans and slow
wer growth in Ca
ards.

•

Funding ccosts (1 bp): benefit from favourable wholesale fu
unding cost.

•

Deposit competition (7 bps): benefit from lower deposit com
mpetition and ac
ctive margin management across deposit productss, particularly terrm
deposits.

•

mpetition and riskk mix (-12 bps): continuedcpressuure on lending margins, including significant homee loan competitio
on and switching
Asset comfrom variaable to fixed hom
me loans in New Zealand,Z
compettition in Global Looans and C&CB.

23

CF
FO OVERVIEWW•

Markets aand treasury (-6 bps):badverse impact of lower earrnings on capital from lower interrest rates, higherr liquid asset holddings and lower
earnings ffrom financial ma
arkets activities.

Average intere
est earning asseets (+$71.0 billio
on or +11%)•

Australia (+$17.7 billion orr +6%): due to grrowth in Home LLoan products whhere market share continues to inncrease.

•

onal Banking (+$4
46.1 billion or +1 8%): $33.0 billio
on increase in Glo
obal Markets maainly from growth in the liquidity
International and Institutio
as well as an inccrease in collateral paid against dderivative liabilitie
es, and foreign ex
xchange translattion impacts. Lending in Global
portfolio, aLoans inccreased an additiional $10.7 billionn despite a comppetitive market.

•

New Zealand (+$6.5 billion or +8%): drivenn by growth in Reetail lending marrket share and coontinued businesss confidence supporting
Commerccial loan growth, as well as foreign exchange tran slation impacts.

•

Global We
ealth and Group Centre (+$0.6 billion or 5%): primmarily due to incrrease in Private Bank lending.

Average depo
osits and other borrowingsb(+$5
53.3 billion or +111%)•

Australia (+$7.6 billion or +5%): growth in customer depos its within Retail anda C&CB, mainly at call productts.

•

onal Banking (+$227.7 billion or +1 3%): due to grow
wth in customer depositsdin Globaal Transaction Banking, particula
arlyInternational and Institutio
ernal repos for funding purposes in Global Marketts, as well as fore
eign exchange trranslation impactts.
in Australia and Asia, exte•

eased customer deposits across Retail and Comm
mercial, particulaarly in Retail savings products, ass
New Zealand (+$7.8 billion or +14%): incre
t
impac
cts.
well as foreign exchange translation•

Global We
ealth and Group Centre (+$10.2 billion or 14%): pprimarily growth In Treasury repo borrowings.

Gro
oup net interestt margin – March 2015 Half Yea
ar v September 22014 Half YearMarch 2015 v S
September 20144
Net interest mmargin (-8 bps)•

Asset mixx and funding mixx (0 bp): favourable funding mix ffrom lower reliance on wholesale funding offset byy adverse asset mix due to sloweergrowth in Cards and commmercial lending.

•Funding ccosts (0 bp): who
olesale funding coosts have remainned broadly flat.

•

Deposit competition (3 bps): benefit from lower deposit com
mpetition across Australia and Ne
ew Zealand.

•

Asset com
mpetition and riskk mix (-6 bps): coontinued pressurre on lending margins, particularly
y in Home Loanss and lower sprea
ads within IIB.

•

Markets aand treasury (-5 bps):bhigher liquid asset holdingss and lower earnings from financia
al markets activitties.

Average intere
est earning asseets (+$41.9 billio
on or +6%)•

Australia (+$9.6 billion or +3%): due to gro
owth in Home Lo an products whe
ere market share continues to inccrease.

•

International and Institutio
onal Banking (+$228.8 billion or +1 0%): $20.5 billio
on increase in Glo
obal Markets maainly from growth in the liquidity
portfolio aand foreign excha
ange translation impacts. Additioonally, lending in Global Loans increased by $6.66 billion.

•

New Zealand (+$3.8 billion or +4%): drivenn by growth in Reetail and Commeercial lending from continued stroong economic conditions, as well as
foreign exxchange translatiion impacts.

•

Global We
ealth and Group Centre (-$0.4 billion or -3%): Brooadly unchangedd during the perio
od.

Average depo
osits and other borrowingsb(+$3
34.6 billion or +77%)•

Australia (+$4.9 billion or +3%): growth in customer depos its within Retail anda Commercial,, mainly at call prroducts.

•

International and Institutio
onal Banking (+$17.6 billion or +88%): due to growtth in customer deeposits in Globall Transaction Banking, particularlly in
Asia, exte
ernal repos for funding purposes in Global Marketts, as well as fore
eign exchange trranslation impactts.

•

New Zealand (+$5.1 billion or +9%): increa
ased customer ddeposits across RetailR
and Comm
mercial, particularrly in Retail savin
ngs products, as well
as foreignn exchange transslation impacts.

•

Global We
ealth and Group Centre (+$6.9 billion or 9%): primmarily growth in Treasury
Trepo boorrowings.

24

CF
FO OVERVIEWW
Income and expen
nses, cont’dOth
her operating inc
comeHalf Year
Mar 15
$M
M
1,217
7

Nett fee and commisssion income1

Sep 14$M
1,178

Movement
Mar 14$M
1,186

Mar 15v.
v Sep 143%

Mar 15v. Mar 14
3%

Nett foreign exchangee earnings1

39
9

53

43

-26%

-9%

Nett funds manageme
ent and insurancee income

691

666

617

4%

12%

Sha
are of associates p
profit1

314
4

267

243

18%

29%

Oth
her1,2

49
9

148

95

-67%

-48%

Global Markets otherr operating income
e

737
7

565

720

30%

2%

3,047
7

2,877

2,904

6%

5%

Cas
sh other operatin
ng income1.
2.

Excluding Global Ma
Markets.
Other income includ
des $125 million gainn on sale of ANZ Trus
stees in July 2014 annd $21 million loss arrising on sale of Saig
gon Securities Inc. (SSSI) in September 20
014.

Half Year

MovementGloobal Markets incoome
Nett interest income

Mar 15$M
M505
5

Sep 14$M
535

Mar 14$M
508

Mar 15v.
v Sep 14
-6%

Mar 15v. Mar 14-1%Oth
her operating incom
me

737
7

565

720

30%

2%

1,242
2

1,100

1,228

13%

1%

Cas
sh Global Marketss income

Half Year

MovementOthher operating inc
come by divisionAus
stralia

Mar 15$M
M
571

Sep 14$M
560

Mar 14$M
556

Mar 15v.
v Sep 142%

Mar 15v. Mar 14
3%

Inte
ernational and Insttitutional Banking1

1,759
9

1,467

1,629

20%

8%

New
w Zealand

183
3

171

178

7%

3%

Global Wealth2

762
2

850

727

-10%

5%

GTS
SO and Group Ce
entre

(228
8)

(171)

(186)

33%

23%

Cas
sh other operatin
ng income

3,047
7

2,877

2,904

6%

5%

1.

Includes a $21 miillion loss arising on salesof SSI in Septem
mber 2014
Includes a $125 m
million gain on sale off ANZ Trustees in Ju
uly 2014.

2.

Oth
her operating inncome – March 20152
Half Year v March 2014 Haalf YearMarch 2015 v M
March 2014
Net fee and coommission income•

Global Trannsaction Banking
g increased $6 millionmdue to an iincrease in Asia driven by Trade Finance.

•

Retail Asia Pacific increase
ed $23 million primmarily due to groowth in Investment & Insurance inncome.

•

Global Wea
alth decreased $10$ million, due too the divestmentt of the ANZ Trus
stees business inn July 2014.

Net foreign ex
xchange earning
gs•

Global Trannsaction Banking
g increased $10 millionmwith both volume and marrgin growth in Au
ustralia.

•

GTSO and Group Centre decreased $14 million due to highher realised losse
es on foreign currrency hedges (offfsetting translation gains elsewherein the Grou
up).

25

CFO OVERVIEW

Net funds management and insurance income•

Global Wealth increased $58 million due to the impact of a one-off Group life plan exit in the March 2014 half, as well as in-force premium growthand improved life insurance lapse experience in the March 2015 half.

•

Retail Asia Pacific increased $8 million primarily due to stronger sales of investment and insurance products.

Share of associates profit•

Shanghai Rural Commercial Bank (SRCB) increased $38 million primarily due to lending growth in the March 2015 half and impairment of aninvestment (held by SRCB) recognised in the March 2014 half.

•

Bank of Tianjin (BoT) increased $24 million primarily due to an increase in underlying earnings mainly attributable to asset growth and improved
cost management.

•

AMMB Holdings Berhad (AMMB) increased $10 million with lower expenses and credit charges.

Other income•

Global Wealth decreased $13 million, primarily due to a non-recurring insurance settlement gain in New Zealand in the March 2014 half.

•

Asia Partnerships decreased $12 million due to dilution gain (from non-participation in a rights issue) relating to BoT in the March 2014 half.

•Group Centre decreased $23 million, primarily driven by a RBA Committed Liquidity Facility fee that commenced in the March 2015 half.

Global Markets income
In tougher market conditions Global Markets income was up 1%:•

Sales income increased by 9%, driven by demand for Commodities and Rates products.

•

Foreign Exchange continued to perform strongly, with market volatility continuing to driving customer demand. Income fell 5% due to market
conditions impacting certain product lines that had contributed to the abnormally strong performance in the March 2014 half.

•Commodities income increased 64% off the back of continuing demand for gold from Asian clients and the trading desk benefiting from fallingcommodity prices.

•

Rates income increased 44% due to improved client product offerings and increased customer hedging activities in the current lower interest
rate environment.

Refer to page 62 for further information.
March 2015 v September 2014
Net fee and commission income•

Global Transaction Banking increased due to increased deal flow in Asia ($6 million) and an increase in Trade Finance fees in the Pacific ($5million).

•Retail Asia Pacific increased $15 million, mainly due to volume driven growth.

Net foreign exchange earnings•

GTSO and Group Centre decreased $25 million due to higher realised losses on foreign currency hedges (offsetting translation gains elsewherein the Group).

•

Australia Retail decreased $7 million, primarily due to seasonally lower travel card activity.

•

Global Transaction Banking increased $6 million, mainly due to a combination of volume and margin growth in Australia and New Zealand.

•

IIB Central Functions increased $9 million due to realised gains on foreign currency balances.

Net funds management and insurance income•

Global Wealth increased $23 million primarily due to solid in-force premium growth and improved claims experience in retail products in the life
insurance business.

Share of associates profit•

BoT increased $41 million, driven by strong asset growth and improved cost management.

•

SRCB increased $32 million, primarily due to lending growth.

•

AMMB decreased $11 million, mainly due to a one-off gain from partial divestment of its insurance businesses ($22 million) recognised in the
September 2014 half.

•

P.T. Bank Pan Indonesia decreased $11 million, primarily due to $10 million of loan recoveries recognised in the September 2014 half.

Other income•

Global Wealth decreased $111 million, primarily due to a $125 million gain on sale of ANZ Trustees recognised in the September 2014 half
partially offset by higher Lenders’ Mortgage Insurance performance in the March 2015 half.

•Group Centre decreased $25 million, primarily driven by RBA Committed Liquidity Facility fee that commenced in the March 2015 half.

•

Asia Partnerships increased $22 million due to the loss arising from the sale of SSI ($21 million) in September 2014.

26

CFO OVERVIEW

Global Markets income
Global Markets has delivered a strong result with income increasing by 13%:•

Sales income increased 20% driven by increased activity with Financial Institutions customers and higher level of corporate client hedging
activity.

•

Foreign Exchange income increased by 41% with higher global foreign exchange market volatility driving increased customer flow.

•

Rates income increased 82% driven by strong customer flow and favourable trading activities.

•

Balance Sheet income decreased 9% and credit income decreased 13% as credit spreads widened, reflecting the increased uncertainty inglobal financial markets.

•

Asia income increased 34% driven by demand for gold and foreign exchange products.

Refer to page 62 for further information.

27

CF
FO OVERVIEWW
Income and expen
nses, cont’d

Half Year

MovementpensesExp
Perrsonnel expenses

Mar 15$M
2,715

Sep 14$M
2,558

Mar 14$M
2,530

Mar 15v. Sep 14
6%

Marr 15v. Marr 14
7%

Premises expenses

455

446

442

2%

3%

Tec
chnology expenses

701

660

606

6%

16%

Res
structuring expensses

10

78

35

-87%

-71%

Oth
her expenses

712

732

673

-3%

6%

Tottal cash operatingg expenses

4,593

4,474

4,286

3%

7%

Tota
al full time equivalent staff (FTE)

51,24350,32849,850

2%

3%

Half Year

MovementExp
penses by divisio
onAus
stralia

Mar 15
$M
M
1,556
6

Sep 14$M
1,536

Mar 14$M
1,479

Mar 15v.
v Sep 141%

Mar 15v. Mar 14
5%

Inte
ernational and Insttitutional Banking

1,771

1,655

1,627

7%

9%

New
w Zealand

539
9

518

513

4%

5%

Global Wealth

489
9

520

484

-6%

1%

GTS
SO and Group Ce
entre

238
8

245

183

-3%

30%

4,593
3

4,474

4,286

3%

7%

Tottal cash operatingg expenses

Opeerating expense
es – March 2015
5 Half Year v Ma
arch 2014 Half Y
Year






March 2015 v M
March 2014•

Personneel expenses incrreased $185 million (7%) due to tthe impact of fore
eign exchange translation, inflatioonary salary increeases and anincrease in frontline resources.

•

Premisess expenses incre
eased $13 millionn (3%) due to thee impact of foreig
gn exchange tran
nslation and inflattionary rent increeases.

•

Technoloogy expenses inccreased $95 million (16%) due too increased depre
eciation and amo
ortisation, higherr data storage and software licencce
costs andd the increased use
u of outsource
e providers.

•

Restructu
uring expenses decreasedd$25 millionm(-71%) duee to decreased restructuring initia
atives primarily inn the GTSO divis
sion.

•

Other exxpenses increase
ed $39 million (6%%) primarily due to the impact of foreign exchange translation, aloong with higher spend on
professio
onal and legal fee
es.

March 2015 v S
September 2014
4•

Personneel expenses incrreased $157 million (6%) due to tthe impact of fore
eign exchange translation, inflatioonary salary increeases and anincrease in frontline resources.

•

Premisess expenses incre
eased $9 million (2%) due to the iimpact of foreignn exchange transslation and inflatioonary rent increa
ases, partly offse
et bylower assset write offs.

•

Technoloogy expenses inccreased $41 million (6%) due to hhigher depreciatiion and amortisation, partly offsett by lower softwa
are impairment
expense.

•Restructu
uring expenses decreasedd$68 millionm(-87%) primmarily due to dec
creased restructu
uring initiatives w
within the IIB divis
sion.

•

Other exxpenses decrease
ed $20 million (-33%) primarily duee to decreased advertisingaspend
d and the write doown of intangible
e assets in Globaal
Wealth inn the Septemberr 2014 half.

28

CFO OVERVIEW
Credit risk
Overall asset quality improved compared to the March 2014 half, with gross impaired assets down $912 million (25%) to $2,708 million at 31 March 2015.
Total credit impairment provisions were $4,028 million as at 31 March 2015, with a decrease of $285 million (7%) compared to 31 March 2014, driven
primarily by a reduction in individual provisions from an improvement in portfolio credit quality.
The total credit impairment charge of $510 million decreased by $18 million (3%) compared to the March 2014 half.
Half Year
Mar 15$M
455

Credit impairment charge/(release)
Individual credit impairment charge

Sep 14$M
542

Movement
Mar 14$M
602

Mar 15v. Sep 14-16%

Mar 15v. Mar 14-24%

Collective credit impairment charge/(release)

55

(81)

(74)

large

large

Total credit impairment charge

510

461

528

11%

-3%

Movement

Half Year

Credit impairment charge/(release)
Australia

Mar 15$M395

Sep 14$M
416

Mar 14$M
402

Mar 15v. Sep 14-5%

Mar 15v. Mar 14-2%

International and Institutional Banking

98

54

162

81%

-40%

New Zealand

19

26

(34)

-27%

large

Global Wealth

(1)

(1)

(1)

0%

0%

GTSO and Group Centre

(1)

(34)

(1)

-97%

0%

510

461

528

11%

-3%

Total credit impairment charge

Individual Credit Impairment Charge
Half Year
Mar 15$M
334

Individual credit impairment charge by division
Australia

Movement

Sep 14$M
413

Mar 14$M374

Mar 15v. Sep 14-19%

Mar 15v. Mar 14-11%

International and Institutional Banking

100

75

215

33%

-53%

New Zealand

22

50

13

-56%

69%

Global Wealth

(1)

1

-

large

n/a

GTSO and Group Centre

-

3

-

-100%

n/a

455

542

602

-16%

-24%

Mar 15v. Sep 14

Total individual credit impairment charge

Movement

Half Year
Mar 15$M

Sep 14$M

Mar 14$M

New and increased individual credit impairments
Australia

530

557

557

-5%

-5%

International and Institutional Banking

202

151

295

34%

-32%

New Zealand

90

138

112

-35%

-20%

Global Wealth

-

1

3

-100%

-100%

GTSO and Group Centre

-

1

-

-100%

n/a

New and increased individual credit impairments

822

848

967

-3%

-15%

Recoveries and write-backs
Australia

(196)

(144)

(183)

36%

7%

International and Institutional Banking

(102)

(76)

(80)

34%

28%

New Zealand

(68)

(88)

(99)

-23%

-31%

Global Wealth

(1)

-

(3)

n/a

-67%

GTSO and Group Centre

-

2

-

-100%

n/a

Recoveries and write-backs

(367)

(306)

(365)

20%

1%

Total individual credit impairment charge

455

542

602

-16%

-24%



Mar 15v. Mar 14

March 2015 v March 2014

The individual credit impairment charge decreased by $147 million (-24%) due primarily to credit quality improvements in IIB, New Zealand and Australia
C&CB. This was partially offset in the New Zealand division due to lower recoveries and write-backs.
March 2015 v September 2014

The individual credit impairment charge decreased $87 million (-16%) with lower new and increased impairment charges being raised in Australia and
New Zealand divisions and higher recoveries and write-backs in Australia division and IIB. This was partially offset by a few large customer provisions
being raised in IIB during the March 2015 half.

29

CFO OVERVIEW

Collective Credit Impairment Charge
Half Year

Collective credit impairment charge/(release) by source
Lending growth
Risk profile

Movement

Mar 15$M
54

Sep 14$M
61

Mar 14$M85

Mar 15v. Sep 14-11%

Mar 15v. Mar 14
-36%

5

(42)

(190)

large

large

Portfolio mix

3

(10)

(10)

large

large

Economic cycle and concentration risk adjustment

(7)

(90)

41

-92%

large

Total collective credit impairment charge/(release)

55

(81)

(74)

large

large

Half Year

Collective credit impairment charge/(release) by division
Australia

Movement

Mar 15$M
61

Sep 14$M
3

Mar 14$M
28

Mar 15v. Sep 14
large

Mar 15v. Mar 14
large
-96%

International and Institutional Banking

(2)

(21)

(53)

-90%

New Zealand

(3)

(24)

(47)

-88%

-94%

Global Wealth

-

(2)

(1)

-100%

-100%

GTSO and Group Centre

(1)

(37)

(1)

-97%

0%

Total collective credit impairment charge/(release)

55

(81)

(74)

large

large



March 2015 v March 2014

The collective credit impairment charge increased by $129 million from a release of $74 million in March 2014 half to a charge of $55 million in March
2015 half. This was driven by Retail portfolio growth in Australia Division and significant improvements in portfolio credit quality in IIB and NZ in the March2014 half that have not been repeated, partially offset by an increase in the economic cycle provision related to mining services in the March 2014 half.
March 2015 v September 2014

The collective credit impairment charge increased by $136 million from a release of $81 million in the September 2014 half to a charge of $55 million in
the March 2015 half. This was driven by Retail portfolio growth in Australian Division, along with improvements in IIB’s portfolio credit quality and arelease from economic cycle provision in the September 2014 half.

30

CFO OVERVIEW
Credit risk, cont’d

Provision for credit impairment balance
As at

Movement

Collective provision

Mar 15$M
2,914

Sep 14$M
2,757

Mar 14$M
2,843

Mar 15v. Sep 14
6%

Mar 15v. Mar 14
2%

Individual provision

1,114

1,176

1,470

-5%

-24%

Total provision for credit impairment

4,028

3,933

4,313

2%

-7%

1

1.

The collective provision includes amounts for off-balance sheet credit exposures $646 million at 31 March 2015 (Sep 14: $613 million; Mar 14: $597 million). The impact on the income
statement for the half year ended 31 March 2015 was a $7 million charge (Sep 14 half: $9 million charge; Mar 14 half: $8 million release).

Gross Impaired Assets
As at
Mar 15$M
2,466

Impaired loans

Movement

Sep 14$M
2,682

Mar 14$M
3,314

Mar 15v. Sep 14-8%

Mar 15v. Mar 14-26%

Restructured items

146

67

60

large

large

Non-performing commitments and contingencies

96

140

246

-31%

-61%

2,708

2,889

3,620

-6%

-25%

(1,081)(1,130)(1,396)-4%-23%

Gross impaired assets
Individual provisions
Impaired loans
Non-performing commitments and contingencies

(33)

(46)

(74)

-28%

-55%

Net impaired assets

1,594

1,713

2,150

-7%

-26%

Gross impaired assets by division
Australia

1,245

1,253

1,463

-1%

-15%

International and Institutional Banking

1,021

1,093

1,471

-7%

-31%

New Zealand

434

532

668

-18%

-35%

Global Wealth

8

11

18

-27%

-56%

Gross impaired assets

2,708

2,889

3,620

-6%

-25%

Gross impaired assets by size of exposure
Less than $10 million

1,903

1,896

2,204

0%

-14%

$10 million to $100 million

607

683

897

-11%

-32%

Greater than $100 million

198

310

519

-36%

-62%

Gross impaired assets

2,708

2,889

3,620

-6%

-25%



March 2015 v March 2014

Gross impaired assets reduced by $912 million (25%) over the March 2015 half driven by improved portfolio credit quality across all divisions resulting inlower levels of new impairments. The Group has an individual provision coverage ratio on impaired assets of 41.1% as at 31 March 2015, up from 40.6%
as at 31 March 2014.
March 2015 v September 2014

Gross impaired assets decreased by $181 million (6%) over the March 2015 half driven by reductions across all divisions, but most notably New Zealand.
The Group has an individual provision coverage ratio on impaired assets of 41.1% as at 31 March 2015, up from 40.7% as at 30 September 2014.

31

CFO OVERVIEW
Credit risk, cont’d

New Impaired Assets
Half Year

Impaired loans
Restructured items

Movement

Mar 15$M
1,141

Sep 14$M
1,303

Mar 14$M
1,431

Mar 15v. Sep 14-12%

Mar 15v. Mar 14
-20%

26

7

10

large

large

30

17

100

76%

-70%

1,197

1,327

1,541

-10%

-22%

New impaired assets by division
Australia

778

830

758

-6%

3%

International and Institutional Banking

236

183

516

29%

-54%

New Zealand

165

308

263

-46%

-37%

Global Wealth

18

6

4

large

large

1,197

1,327

1,541

-10%

-22%

Non-performing commitments and contingencies
Total new impaired assets

Total new impaired assets

March 2015 v March 2014

New impaired assets decreased 22% primarily due to the non-recurrence of a few large customer downgrades in IIB in the March 2014 half, along withongoing portfolio credit quality improvement in New Zealand.
March 2015 v September 2014

New impaired assets decreased 10% primarily due to decreases in the Australia and New Zealand as portfolio credit quality improved. This was partially
offset by increase in IIB due to the downgrade of a few large customers.

As at

Movement

Ageing analysis of net loans and advancesthat are past due but not impaired1
1-5 days

Mar 15$M
3,323

Sep 14$M
3,082

Mar 14$M
3,345

Mar 15v. Sep 14
8%

Mar 15v. Mar 14-1%

6-29 days

5,271

4,559

4,660

16%

13%

30-59 days

2,069

1,624

2,037

27%

2%

60-89 days

1,160

1,005

980

15%

18%

>90 days

2,248

1,982

2,061

13%

9%

Total

14,071

12,252

13,083

15%

8%

1.

A policy change was implemented during the half whereby the Group changed the criteria for including past due loans attributable to hardship in the ageing analysis. Comparative
information has not been restated.

March 2015 v March 2014

The 90 days past due but not impaired increased by 9%, primarily within Australia Home Loans. This was driven by changes in impairment criteria forpast due loans attributable to hardship.
March 2015 v September 2014

The 90 days past due but not impaired increased by 13%, primarily within Australia Home Loans and New Zealand division. The increase in Australia
Home Loans was driven by changes in impairment criteria for past due loans attributable to hardship. The increase in New Zealand division is attributable
to seasonal factors.
Other delinquency bands experienced increases as a result of seasonal factors in addition to credit policy changes whereby the criteria for approving
repayment holidays to borrowers have been tightened.

32

CFO OVERVIEW
Income tax expense
Half Year

Movement

Income tax expense on cash profit

Mar 15$M
1,398

Sep 14$M
1,367

Mar 14$M
1,333

Mar 15v. Sep 142%

Mar 15v. Mar 14
5%

Effective tax rate (cash profit)

27.5%

27.5%

27.5%

0%

0%



March 2015 v March 2014

The effective tax rate (ETR) remained unchanged at 27.5%. The reduction to the ETR attributable to the higher earnings from equity accounted
associates was offset by the impact of higher non-deductible coupons paid on convertible instruments and a higher average tax rate on increased
offshore earnings in March 2015 half.
March 2015 v September 2014

The ETR remained unchanged at 27.5%. The ETR benefit associated with the sale of SSI and ANZ Trustees in the September 2014 half was offset by
the higher average tax rate on increased offshore earnings in March 2015 half.

Impact of exchange rate movements/revenue hedges
The following table presents the Group’s cash profit results and net loans and advances neutralised for the impact of foreign exchange movements.
Comparative data has been adjusted to remove the translation impact of foreign exchange movements by retranslating prior period comparatives atcurrent period foreign exchange rates.
Half Year
Mar 15$M
7,138

Net interest income

Movement

Sep 14$M
7,156

Mar 14$M
6,874

Mar 15v. Sep 14
0%

Mar 15v. Mar 14
4%

Other operating income

3,047

2,973

2,996

2%

2%

Operating income

10,185

10,129

9,870

1%

3%

Operating expenses(4,593)(4,608)(4,399)0%

4%Profit before credit impairment and income tax

5,592

5,521

5,471

1%

2%

Credit impairment charge

(510)

(465)

(537)

10%

-5%

Profit before income tax

5,082

5,056

4,934

1%

3%

Income tax expense(1,398)(1,388)(1,352)

1%

3%

(8)

(7)

(7)

14%

14%

3,676

3,661

3,575

0%

3%

Non-controlling interests
Cash profit (FX adjusted)

Half Year Mar 2015v. Half Year Mar 2014

Half Year Mar 2015v. Half Year Sep 2014

Net interest income

FX
unadjusted% growth
1%

FX
adjusted% growth0%

FX
impact$M
123

FX
unadjusted% growth
6%

FX
adjusted% growth
4%

FX
impact$M
110

Other operating income

6%

2%

96

5%

2%

92

Operating income

3%

1%

219

5%

3%

202

Operating expenses

3%

0%

(134)

7%

4%

(113)
89

Profit before credit impairment and income tax

3%

1%

85

4%

2%

Credit impairment charge

11%

10%

(4)

-3%

-5%

(9)

Profit before income tax

2%

1%

81

5%

3%

80

Income tax expense

2%

1%

(21)

5%

3%

(19)

Non-controlling interests

33%

14%

(1)

33%

14%

(1)

Cash profit

2%

0%

59

5%

3%

60

The Group uses derivative instruments to economically hedge against the adverse impact on future offshore revenue and expense streams fromexchange rate movements.
After taking into account the realised losses on foreign currency hedging arrangements, movements in average exchange rates resulted in an increase of$60 million in the Group’s cash profit over the March 2014 half. Realised losses on foreign currency hedges increased cash profit by $11 million (pre-tax)
compared to the March 2014 half and are recorded against other operating income in GTSO & Group Centre. Excluding the impact of realised foreign
currency hedge losses, other operating income (FX unadjusted) would have increased 5% on the March 2014 half.

33

CFO OVERVIEW
Earnings related hedges
The Group has taken out economic hedges against New Zealand Dollar and US Dollar (and USD correlated) revenue and expense streams. New
Zealand dollar exposure relates to the New Zealand geography and USD exposure relates to APEA. Details of these hedges are set out below.
Half Year
Mar 15$M
2,375

Sep 14$M
2,042

Mar 14$M
2,275

Amount taken to income (pre-tax statutory basis)2

(220)

107

(104)

Amount taken to income (pre-tax cash basis)3

(51)

(78)

(71)

NZD Economic hedges
Net open NZD position (notional principal)1

USD Economic hedges
Net open USD position (notional principal)1
2

Amount taken to income (pre-tax statutory basis)

823

797

900

(129)

(25)

(5)

(46)

(4)

(15)

3

Amount taken to income (pre-tax cash basis)
1.
2.
3.

Value in AUD at contracted rate.
Unrealised valuation movement plus realised revenue from closed hedges.
Realised revenue from closed hedges.

As at 31 March 2015, the following hedges are in place to partially hedge future earnings against adverse movements in exchange rates:•

NZD 2.6 billion at a forward rate of approximately NZD 1.10 / AUD.

•

USD 0.7 billion at a forward rate of approximately USD 0.88 / AUD.

During the March 2015 half:•

NZD 0.9 billion of economic hedges matured and a realised loss of $51 million (pre-tax) was recorded in cash profit.

•

USD 0.4 billion of economic hedges matured and a realised loss of $46 million (pre-tax) was recorded in cash profit.

•

An unrealised loss of $252 million (pre-tax) on the outstanding NZD and USD economic hedges was recorded in the statutory income statement
during the half. When determining cash profit, this unrealised loss has been treated as an adjustment to statutory profit as these are hedges of future
NZD and USD revenues.

Earnings per share1
Movement

As at

Mar 15

Sep 14

Mar 14

Mar 15v. Sep 14

Mar 15v. Mar 14

Basic

133.6

131.5

128.7

2%

4%

Diluted

129.9

126.5

124.3

3%

5%

Cash earnings per share (cents)

Cash weighted average number of ordinary shares (M)2
Basic

2,750.0

2,736.7

2,728.00%1%

Diluted

2,926.8

2,945.2

2,918.8-1%0%Cash profit ($M)

3,676

3,602

3,515

2%

5%

(1)

(3)

(3)

-67%

-67%

Cash profit less preference share dividends ($M)

3,675

3,599

3,512

2%

5%

Diluted cash profit less preference share dividends ($M)

3,802

3,726

3,628

2%

5%

Preference share dividends ($M)

1.

2.

The earnings per share calculation excludes the Euro Trust Securities (preference shares). The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15
December 2014.
Includes Treasury shares held in Global Wealth.

34

CFO OVERVIEWDividends

Half Year

Dividend per ordinary share (cents)
Interim (fully franked)1
Final (fully franked)
Total (fully franked)
Ordinary share dividends used in payout ratio ($M)

2

Cash profit ($M)
Less: Preference share dividends paid
Ordinary share dividend payout ratio (cash basis)2
1.
2.

Movement

Mar 1586

Sep 14n/a

Mar 1483

Mar 15v. Sep 14
n/a

Mar 15v. Mar 14
4%

n/a

95

n/a

n/a

n/a

86

95

83

-9%

4%

2,379

2,619

2,278

-9%

4%

3,676

3,602

3,515

2%

5%

-67%

-67%

(1)

(3)

(3)

64.7%

72.8%

64.9%

2015 interim dividend is proposed.
Dividend payout ratio is calculated using proposed 2015 interim dividend of $2,379 million, which is based on the forecast number of ordinary shares on issue at the dividend record date.
Dividend payout ratios for the September 2014 half and March 2014 half are calculated using actual dividend paid of $2,619 million and $2,278 million respectively. Dividend payout ratio is
calculated by adjusting profit attributable to shareholders of the company by the amount of preference share dividends paid.

The Directors propose that an interim dividend of 86 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2015. The proposed 2015
interim dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZD 10 cents per ordinary share will also be
attached.
Economic profit
Half Year
Mar 15$M
3,506

Statutory profit attributable to shareholders of the Company
Adjustments between statutory profit and cash profit

Sep 14$M
3,879

Movement
Mar 14$M
3,392

Mar 15v. Sep 14-10%

Mar 15v. Mar 14
3%
38%

170

(277)

123

large

Cash Profit

3,676

3,602

3,515

2%

5%

Economic credit cost adjustment

(290)

(298)

(256)

-3%

13%
10%

Imputation credits

657

647

597

2%

Economic return

4,043

3,951

3,856

2%

5%

Cost of capital(2,746)(2,573)(2,484)

7%

11%

Economic profit

1,297

1,378

1,372

-6%

-5%

Economic profit is a risk adjusted profit measure used to evaluate business unit performance and is considered in determining the variable component of
remuneration packages. This is used for internal management purposes and is not subject to review by the external auditor.
Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the actual credit loss charge withinternal expected loss based on the average loss per annum on the portfolio over an economic cycle. The value of imputation credits to our shareholders
is recognised, measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At an ANZ Group level, this is calculatedusing average ordinary shareholders’ equity (excluding non-controlling interests), multiplied by a cost of capital rate (11% - as has been consistently
applied over a number of reporting periods) plus the dividend on preference shares. At a business unit level, capital is allocated based on economic
capital, whereby higher risk businesses attract higher levels of capital. This method is designed to help drive appropriate risk management and ensurebusiness returns align with the relevant risk. Key risks covered include credit risk, operating risk, market risk and other risks.
Economic profit decreased 5% against the prior comparable period due to higher cash profit of 5% being more than offset by higher economic credit costadjustment and the cost of higher capital levels.
Economic profit decreased 6% against the prior half due to higher cash profit of 2% being more than offset by higher economic credit cost adjustment andhigher cost of capital levels.

35

CFO OVERVIEW
Condensed balance sheet
As at

Movement

Mar 15$B
79.3

Sep 14$B
58.3

Mar 14$B
56.1

Mar 15v. Sep 14
36%

Mar 15v. Mar 14
41%

Trading and available-for-sale assets

89.7

80.6

73.5

11%

22%

Derivative financial instruments

73.6

56.4

43.8

30%

68%

Net loans and advances

558.2

521.8

509.3

7%

10%

Investment backing policy liabilities

36.5

33.6

33.2

9%

10%

Other

22.8

21.4

21.9

7%

4%

Total assets

860.1

772.1

737.8

11%

17%

AssetsCash / Settlement balances owed to ANZ / Collateral paid

Liabilities
Settlement balances owed by ANZ / Collateral received

12.6

15.7

12.0

-20%

5%

Deposits and other borrowings

567.2

510.1

498.3

11%

14%

Derivative financial instruments

73.2

52.9

45.9

38%

59%

Debt issuances

85.7

80.1

73.6

7%

16%

Policy liabilities and external unit holder liabilities

40.3

37.7

36.7

7%

10%

Other

29.0

26.3

24.3

10%

19%

Total liabilities

808.0

722.8

690.8

12%

17%

Total equity

52.1

49.3

47.0

6%

11%



March 2015 v March 2014•

Cash, settlement balances and collateral paid increased by $23 billion, with $5 billion due to foreign exchange translation. The increase wasprimarily driven by increased short term deposits with the US Federal Reserve and Bank of England, following the introduction of Basel III
liquidity risk standards in Australia on 1 January 2015, and higher collateral paid on derivative liabilities with collateralised counterparties.

•

Trading and available-for-sale assets increased $16 billion, with $4 billion due to foreign exchange translation. The increase was primarily driven
by larger holdings in the prime liquidity portfolio.

•

Derivative financial instruments increased on higher customer demand for interest rate hedging products in light of low interest rates, along withincreased customer demand for foreign exchange spot and forward products driven by business growth in Asia and market volatility. Net
derivative financial instruments increased by $2 billion primarily driven by movements in foreign exchange and interest rates, along with theimpact of foreign exchange translation.

•

Net loans and advances increased $49 billion, with $19 billion due to foreign exchange rate translation, $20 billion growth in Australia divisionhome loan and non-housing term loans, a $5 billion increase in New Zealand home loans and non-housing term loans and a $5 billion increasein IIB term loans.

•

Deposits and other borrowings increased $69 billion, with $28 billion due to foreign exchange rate translation impacts, $18 billion growth in IIB
term deposits, other current account deposit products and deposits from banks, $7 billion increase in Australia division from an increase of $14
billion in deposits products partially offset by a reduction in term deposits of $7 billion, a $7 billion increase in New Zealand term deposits andother call deposit products and growth of $6 billion in Group Treasury certificates of deposit and commercial paper.

 March 2015 v September 2014•

Cash, settlement balances and collateral paid increased by $21 billion, with $4 billion due to foreign exchange translation. The increase wasprimarily driven by an increase in short term deposits with the US Federal Reserve and Bank of England, following the introduction of Basel III
liquidity risk standards in Australia on 1 January 2015, and higher collateral paid on derivative liabilities with collateralised counterparties.

•

Derivative financial instruments increased on higher customer demand for interest hedging products in light of low interest rates, along withincreased customer demand for foreign exchange sport and forward products driven by business growth in Asia and market volatility. Net
derivative financial instruments decreased by $3 billion with the impact of movements in foreign exchange and interest rates offsetting the impactof foreign exchange translation.

•

Net loans and advances increased $36 billion, with $20 billion due to foreign exchange translation, $9 billion growth in Australia division homeloans, growth of $3 billion in New Zealand home loans and non-housing term loans and a $4 billion increase in IIB term loans partially offset by areduction in commercial bills.

•

Deposits and other borrowings increased $57 billion, with $26 billion due to foreign exchange translation, $11 billion growth in IIB term deposits,commercial paper and deposits from banks, $4 billion growth in New Zealand deposit products and $12 billion increase in Group Treasury
certificates of deposits and commercial paper.

36

CFO OVERVIEW

Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or maturing wholesaledebt, or that the Group has insufficient capacity to fund increases in assets. The timing mismatch of cash flows and the related liquidity risk is inherent inall banking operations and is closely monitored by the Group and managed in accordance with the risk appetite set by the Board.
The Group’s approach to liquidity risk management incorporates two key components:


Scenario modelling of funding sources
ANZ’s liquidity risk appetite is defined by the ability to meet a range of regulatory and internal liquidity metrics mandated by the Board. The metrics
cover a range of scenarios of varying duration and level of severity. This framework:•

Provides protection against shorter-term but more extreme market dislocations and stresses.

•

Maintains structural strength in the balance sheet by ensuring an appropriate amount of longer-term assets are funded with longer-term
funding.

•

Ensures no undue timing concentrations exist in the Group’s funding profile.

A key component of this framework is the Liquidity Coverage Ratio (LCR) which was implemented in Australia on 1 January 2015. The LCR is asevere short term liquidity stress scenario, introduced as part of the Basel III international framework for liquidity risk measurement, standards andmonitoring. As part of meeting the LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia (RBA). The
CLF has been established as a solution to a High Quality Liquid Asset (HQLA) shortfall in the Australian marketplace and provides an alternative
form of RBA-qualifying liquid assets. The total amount of the CLF available to a qualifying ADI is set annually by APRA.
As at
Liquidity Coverage Ratio1
Cash outflows3,4

Movement

Mar 15$B

Sep 14$B

Mar 14$B2

Mar 15v. Sep 14

Mar 15v. Mar 14

174.8

157.1

156.3

11%

12%

Cash inflows3

29.4

22.4

25.8

31%

14%

Net cash outflows

145.4

134.7

130.5

8%

11%

Total High Quality Liquid Assets4,5

173.0

149.6

120.4

16%

44%

Liquidity Coverage Ratio (%)

119%

111%

92%

1.
2.
3.
4.
5.

All currency Group LCR.
March 2014 LCR reported on a best endeavours basis.
Derivative cash flows are included on a net basis.
RBA open-repo arrangement netted down by exchange settlement account cash balance.
Market value post discount as defined in APRA Prudential Standard APS 210 Liquidity.

37

CFO OVERVIEW

Liquid assets
The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High quality liquid assets comprise three categories, with the definitions consistent with
Basel III LCR:•

Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for repurchasewith central banks to provide same-day liquidity.

•

High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt securities
and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.

•

Alternative liquid assets (ALA): Assets qualifying as collateral for the CLF and eligible securities listed by the Reserve Bank of New Zealand(RBNZ).

The Group monitors and manages the composition of liquid assets to ensure diversification by asset class, counterparty, currency and tenor.
Minimum levels of liquid assets held are set annually based on a range of ANZ specific and general market liquidity stress scenarios such that
potential cash flow obligations can be met over the short to medium term, and holdings are appropriate to existing and future business activities,
regulatory requirements and in line with the approved risk appetite.

As atMarket Values Post Discount1

HQLA12

Movement

Mar 15$B

Sep 14$B

Mar 14$B

Mar 15v. Sep 14

Mar 15v. Mar 14

103.8

81.0

70.9

28%

46%

HQLA2

3.0

2.7

-

11%

n/a

Internal Residential Mortgage Backed Securities (Australia)

43.5

43.5

29.6

0%

47%

Internal Residential Mortgage Backed Securities (New Zealand)

5.6

5.1

5.1

10%

10%

Other ALA3

17.1

17.3

14.8

-1%

16%

Total Liquid Assets

173.0

149.6

120.4

16%

44%

1.
2.
3.

Discount as defined in APRA Prudential Standard APS 210 Liquidity.
RBA open-repo arrangement netted down by exchange settlement account cash balance.
Comprised of assets qualifying as collateral for the Committed Liquidity Facility (CLF), excluding internal RMBS, up to approved facility limit; and any liquid assets contained in the
RBNZ's Liquidity Policy - Annex: Liquidity Assets - Prudential Supervision Department Document BS13A12.

38

CFO OVERVIEW
Funding
ANZ targets a diversified funding base, avoiding undue concentrations by investor type, maturity, market source and currency.
$10.9 billion of term wholesale debt (with a remaining term greater than one year as at 31 March 2015) was issued during the March 2015 half.
Furthermore, $1.5 billion of Additional Tier 1 Capital was also issued during the March 2015 Half. The weighted average tenor of new term debt was 4.6
years (2014: 4.9 years).
The following tables show the Group’s total funding composition:

As at

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Customer deposits and other liabilities1
Australia

162,587

160,683

156,0801%

4%International and Institutional Banking

201,124

183,126

172,252

10%

17%

New Zealand

60,29351,36051,74917%

17%

Global Wealth

17,357

13,844

12,69925%

37%

GTSO and Group Centre(5,214)(5,294)(4,758)-2%

10%

Customer deposits

436,147

403,719

388,022

8%

12%

Other funding liabilities2

12,315

14,502

10,895-15%

13%

Total customer liabilities (funding)

448,462

418,221398,9177%

12%Wholesale funding3
Debt issuances484,85979,29172,747

7%

17%
24%

Subordinated debt

16,463

13,607

13,22621%

Certificates of deposit

59,64652,75457,707

13%

3%

Commercial paper

22,72915,152

16,041

50%

42%

Other wholesale borrowings5,6

53,62542,46043,87126%

22%

Total wholesale funding

237,322203,264

203,592

17%

17%

Shareholders' Equity (excl. preference shares)

52,051

48,413

46,167

8%

13%

Total Funding

737,835

669,898

648,676

10%

14%

As at
Mar 15$M

Movement

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Funded Assets
Other short term assets & trade finance assets7

87,75574,925

79,11817%

11%Liquids6

123,835

100,951

85,65523%

45%

Short term funded assets

211,590

175,876

164,773

20%

28%

Lending & fixed assets8

526,245494,022483,903

7%

9%

Total Funded Assets

737,835

669,898

648,676

10%

14%

Other short term liabilities

30,85822,67625,02336%

23%

Short term funding

60,394

46,46655,29430%

9%Term funding < 12 months

31,86023,88818,637

33%

71%

Other customer deposits1,9

101,223

89,82584,94013%

19%

Total short term funding liabilities

224,335

182,855

183,894

23%

22%

Stable customer deposits1,10

370,331347,237

331,488

7%

12%

Funding Liabilities3,4,6

Term funding > 12 months

83,66584,51979,805-1%

5%

Shareholders' equity and hybrid debt

59,50455,28753,4898%

11%

Total Stable Funding

513,500

487,043464,7825%

10%

Total Funding

737,835

669,898

648,676

10%

14%

1.
2.
3.
4.
5.

6.
7.
8.
9.
10.

Includes term deposits, other deposits and an adjustment recognised in Group Centre to eliminate Global Wealth investments in ANZ deposit products.
Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Global Wealth.
Excludes liability for acceptances as they do not provide net funding.
Excludes term debt issued externally by Global Wealth.
Includes borrowings from banks, net derivative balances, special purpose vehicles, other borrowings and Euro Trust securities (preference shares). The Euro Trust Securities were boughtback by ANZ for cash at face value and cancelled on 15 December 2014.
RBA open-repo arrangement netted down by the exchange settlement account cash balance.
Includes short-dated assets such as trading securities, available-for-sale securities, trade dated assets and trade finance loans.
Excludes trade finance loans.
Total customer liabilities (funding) plus Central Bank deposits less Stable customer deposits.
Stable customer deposits represent operational type deposits or those sourced from retail / business / corporate customers and the stable component of Other funding liabilities.

39

CF
FO OVERVIEW
W
Cap
pital Manageme
ent
As at
Inte
ternationally Com
mparable Basel 31

APRA Basel 3
Mar 15

Sep 14

Mar
M 14

Mar 15

Sep
S 14

Ma
ar 14

Cap
pital RatiosCom
mmon Equity Tier 1

8.7%

8.8%

8.3%

12.4%

12.7%

12
2.2%

Tierr 1

10.6%

10.7%

10.3%

14.7%

15.0%

14
4.7%

Tota
al capital

12.6%

12.7%

12.1%

17.1%

17.5%

16
6.8%

Risk
k weighted assetss ($B)

386.9

361.5

360.7

320.5

295.1

2
293.2

1.

Internationally Co
omparable methodolo
ogy as per the “Austrralian Bankers’ Assocciation: International comparability of capital ratios of Australiaa’s major banks” (August 2014) report
prepared by PwC
C Australia.

APR
RA Basel 3 Commmon Equity Tie
er 1 (CET1) – Maarch 2015 v Sep
ptember 20141.

Capital Deductions represents the moveement in retained earrnings in deconsolidaated entities, capitalis
sed software and other intangibles in the pperiod.

2.

9.3 million ordinary shares were issued under the Dividend Reinvestment
R
Plan annd Bonus Option Pla
an for the 2014 final dividend.
dMarch 2015 v S
September 20144
ANZ’s CET1 ratio decreased 7 bps to 8.7% in th
he March 2015 h
half. Key drivers forf the CET1 ratioo movement durring the half weree:•Capital g
generation from cashcearnings whhich more than ooffset capital usag
ge from RWA groowth and other bbusiness capital deductions.
dNetorganic ccapital generation is 59 bps or $2
2.1 billion;•

Paymentt of the Septemb
ber 2014 Final Div
vidend (net of shhares issued undder the DRP) redu
uced CET1 ratio by 64 bps;•

Other impacts of -2 bps mainlym
due to nett impacts of non--cash earnings, net
n deferred tax assetabalance moovements and RWA
R
measuremeentchanges.

40

CF
FO OVERVIEWWAPRA to Internatio
onally Comparable1 Common Equity
E
Tier 1 (CEET1) as at 31 Ma
arch 20151.

ANZ’s interpretatiion of the regulationss documented in the BaselB
Committee pub
ublications; “Basel 3: A global regulatory frramework for more reresilient banks and ba
anking systems” (Junne2011) and “Interna
ational Convergencee of Capital Measurem
ment and Capital Staandards” (June 2006)). Also includes differences identified in P
PwC’s report on ”Inteernational Comparabiilityof Capital Ratios oof Australia’s Major Banks”
B(August 20144), commissioned by the Australian Bankeers Association.

The above provvides a reconcilia
ation of the CET1
1 ratio under APR
RA’s Basel 3 pru
udential capital sttandards to Internnationally Comparable Basel 3
standards. APR
RA views the Bassel 3 reforms as a minimum requ irement and hence has not incorporated some off the concessions
s proposed in theeBasel 3 rules annd has also set higherhrequiremeents in other areaas. As a result, AustralianAbanks’ Basel 3 reportedd capital ratios will
w not be directlyy
comparable witth international peers. The Interna
ational Compara
able Basel 3 CET
T1 ratio incorpora
ates differences bbetween APRA anda both the Bassel
Committee Bassel 3 framework (including(
differences identified inn the March 2014
4 Basel Committeees Regulatory C
Consistency Assessment
Programme (RCCAP) on Basel 3 implementation in Australia) andd its application in major offshore jurisdictions.
The material diffferences in APR
RA’s Basel 3 and Internationally C
Comparable Baseel 3 ratios include:
Deductions•

Investment in insurannce and banking associates – AP
PRA requires full deduction again
nst CET1. On an Internationally Comparable
Cbasiss,these investments arre subject to a cooncessional thresshold before a deeduction is required.

•Defeerred tax assets – A full deductionn is required fromm CET1 for deferrred tax assets (DDTA) relating to ttemporary differe
ences. On an
Interrnationally Compparable basis, thiss is first subject tto a concessiona
al threshold beforre the deduction is required.

•

Capitalised expensess net of deferred fee income – Addjustments to CE
ET1 for capitalise
ed expenses andd deferred fee inccome are notuired under an Intternationally Com
mparable basis.
requRisk Weighted Assets (RWA)•IRRB
BB RWA – APRA
A requires inclusion of Interest Raate Risk in the Banking Book (IRRBB) within the R
RWA base for thhe CET1 ratio
calcu
ulation. This is noot required under an Internationaally Comparable basis.

•

Morttgages RWA – APRA
A
imposes a floor of 20% on tthe downturn Los
ss Given Defaultt (LGD) used in ccredit RWA calcu
ulations for
resid
dential mortgages. The Internationally Comparablle Basel 3 framew
work only require
es downturn LGD
D floor of 10%.

•

Speccialised Lending - APRA requiress the supervisoryy slotting approac
ch be used in dettermining credit R
RWA for specialised lending
expo
osures. The Interrnationally Compparable basis alloows for the advan
nced internal ratings based approoach to be used when calculatingg
RWA
A for these expossures.

•

Unse
ecured Corporatee Lending LGD – Adjustment to aalign ANZ’s unse
ecured corporate lending LGD to 45% to be consiistent with bankss inothe
er jurisdictions. Th
he 45% LGD rate
e is also used in the Foundation Internal Ratings--based approachh (FIRB).

•

Undrawn Corporate Lending Exposure at Default (EAAD) – To adjust ANZ’sA
credit conv
version factors (CCCF) for undrawn corporate loan
commitments to 75%% (used in FIRB approach)ato aliggn with banks in otherojurisdictionss.

41

CFO OVERVIEWOther regulatory developments
Financial System Inquiry (FSI)The Australian Government recently completed a comprehensive inquiry into Australia’s financial system. The final FSI report was released on 7
December 2014. The contents of the final FSI report are wide-ranging and key recommendations that may have an impact on regulatory capitallevels include: Setting capital standards such that Australian Authorised Deposit-taking Institutions (ADI) capital ratios are unquestionably strong; Raising the average internal ratings-based (IRB) mortgage risk weight to narrow the difference between average mortgage risk-weight for ADIs
using IRB models and those using standardised risk weights;
 Implementing a framework for minimum loss absorbing and recapitalisation capacity in line with emerging international practice; Developing a common reporting template that improves the transparency and comparability of capital ratios of Australian ADIs; and Introducing a leverage ratio that acts as a backstop to ADI’s risk-based capital requirements, in line with Basel framework.
The Australian Government has announced that it intends to consult with industry and consumers before making any decisions on therecommendations. ANZ has provided a submission to the Australian Government, with the consultation period closed at the end of March 2015. The
final outcome of the FSI, including any impacts on ANZ and the timing of these impacts, are uncertain.

Liquidity Ratios
The Basel 3 Liquidity changes include the introduction of two liquidity ratios to measure liquidity risk; (i) the Liquidity Coverage Ratio (LCR) whichbecame effective on 1 January 2015 and (ii) the Net Stable Funding Ratio (NSFR).
The final Basel 3 revised NSFR standard was released in October 2014, and is broadly consistent with the previous version. It will become theminimum Basel standard on 1 January 2018, and it is expected APRA will adopt the same timeline. As part of managing future liquidity
requirements, ANZ monitors the NSFR ratio in its internal reporting and is well placed to meet this requirement.



Domestic Systemically Important Bank (D-SIB) Framework
APRA has released details of its D-SIB framework for implementation in Australia and has classified ANZ and three other major Australian banks as
domestic systemically important banks. As a result a Capital Conservation Buffer (CCB) will be applied to four major Australian banks, increasing
capital requirements by 100 bps from 1 January 2016 and further strengthening the capital position of Australia’s D-SIBs. ANZ’s current capital
position is already in excess of APRA’s requirements including the D-SIB overlay. The Group is well placed for D-SIB implementation in January
2016.



Composition of Level 2 ADI GroupIn May 2014, APRA provided further clarification to the definition of the Level 2 ADI group, where subsidiary intermediate holding companies are
now considered part of the Level 2 Group.
The above clarification results in the phasing out, over time, of capital benefits arising from the debt issued by ANZ Wealth Australia Limited(ANZWA). As at 31 March 2015, ANZWA has $805 million of debt outstanding which is equivalent to approximately 21 bps of CET1. APRA has
approved transitional arrangements, in line with the existing maturity profile of the debt in June 2015 ($405 million) and March 2016 ($400 million).
The Group is well placed to manage the future transitional impact through organic capital generation.

Level 3 Conglomerates (“Level 3”)
In August 2014, APRA announced its planned framework for the supervision of Conglomerates Group (Level 3) which includes updated Level 3
capital adequacy standards. These standards will regulate a bancassurance group such as ANZ as a single economic entity with minimum capitalrequirements and additional monitoring on risk exposure levels.
APRA has deferred a decision on the implementation date as well as the final form of the Level 3 framework until the Australian Government’s
response to the FSI recommendations have been announced and considered by APRA. APRA has committed to a minimum transition period of 12months for the affected institutions to comply with the new requirements once an implementation date is established.
Based upon the current draft of the Level 3 standards covering capital adequacy, group governance, risk management and risk exposures, ANZ is
not expecting any material impact on its operations.



APRA Discussion Paper on Disclosure Reforms
In September 2014, APRA released a consultation package for discussion on the proposed implementation of the internationally agreed disclosure
framework on the leverage ratio, liquidity coverage ratio and the identification of potential global systemically important banks (G-SIBs). APRA willconsider submissions to these proposed requirements (submissions to APRA closed on 31 October 2014) before finalising the standards for
implementation. APRA initially intended for these requirements to become effective from 1 January 2015, but has now deferred implementation to adate yet to be determined.
 Leverage Ratio
APRA’s draft leverage ratio will apply to those ADIs using the IRB approach to Credit Risk Weighted Assets. Leverage ratio requirements areincluded in the Basel Committee on Banking Supervision (BCBS) Basel 3 capital framework as a supplement to the current risk based capitalrequirements and is intended to restrict the build-up of excessive leverage in the banking system.
In the draft requirements, APRA has maintained the BCBS calculation of the leverage ratio of Tier 1 Capital expressed as a percentage of
Exposure Measure. The current BCBS minimum leverage ratio requirement is 3%. APRA has not yet announced details of the minimum
requirement which will apply to impacted Australian ADIs.
Public disclosure of the leverage ratio for Australian IRB ADIs is expected to commence from the date of the first financial report after animplementation date has been determined by APRA, with subsequent disclosures published on a quarterly basis. Explanation of key drivers ofmaterial changes in the ADIs leverage ratio between the previous and current reporting periods is also required.

42

CFO OVERVIEW Liquidity Coverage Ratio (LCR) disclosures
The proposed LCR external disclosures will be made half-yearly from the date of the first financial report after an implementation date has been
determined by APRA, and are largely as expected and in line with the previously released Basel proposals.
 Globally Systemically Important Bank (G-SIB) indicators disclosures
APRA proposes that the four major Australian ADIs report a set of 12 financial indicators used in the G-SIB framework to identify banks thatshould be designated as systemically important from a global perspective. These indicators reflects the size, interconnectedness, level of crossjurisdictional activities and complexity of the ADIs which are then used to calculate each ADI’s ‘systemicness’ score. ADIs identified as G-SIBs
will be imposed with higher loss absorbency (HLA) requirements in the form of additional CET1 capital. As at reporting date, no Australian ADIs
(ANZ included) are considered globally systemically important.
Under current draft requirements, major Australian ADIs must disclose the 12 indicators on an annual basis. The indicator values are to bereported as at an ADI’s financial year-end, no later than four months after the date on which the indicator values are based. The disclosures caneither be included in an ADI’s annual financial report or in the ‘Regulatory Disclosures’ section of an ADI’s website.


Revisions to the Standardised Approach for Credit Risk and Capital Floors
In December 2014, BCBS released two consultation papers on their proposals to revise the approach to measuring Standardised Risk Weighted
Assets (RWA) for credit risk (this is in addition to their proposals on standardised approaches to market risk, counterparty credit risk and operationalrisks announced earlier in 2014) and to impose capital floors based on these revised approaches to the RWA measurement. These proposals are
aimed at reducing RWA variability amongst banks and improving risk sensitivities to key drivers of risk, whilst reducing the reliance on external
credit rating when setting capital charges.
BCBS is currently undertaking a Quantitative Impact Study (QIS) to calibrate the proposed Standardised RWA and capital floor requirements, and
ANZ participated in this exercise. The impact of these changes to ANZ and other Australian ADIs cannot be determined until BCBS finalise theircalibration and proposals incorporating comments from the industry (consultation closed on 27 March 2015). Final impacts are also subject to theform of the BCBS proposal that APRA will implement for Australian ADIs.

43

CFO OVERVIEWTechnology infrastructure spend1
Technology infrastructure spend includes expenditure that develops and enhances the Group's technology infrastructure to meet business and strategic
objectives and to improve capabilities and efficiencies.
Half Year

Movement

Expensed investment spend

Mar 15$M
123

Sep 14$M
147

Mar 14$M
134

Mar 15v. Sep 14-16%

Mar 15v. Mar 14-8%

Capitalised investment spend

314

430

349

-27%

-10%

Technology infrastructure spend

437

577

483

-24%

-10%

Comprising

Half Year

Movement

Mar 15$M
204

Sep 14$M
217

Mar 14$M
221

Mar 15v. Sep 14-6%

Productivity

102

159

104

-36%

-2%

Risk and compliance

82

131

111

-37%

-26%

GrowthMar 15v. Mar 14-8%

Infrastructure and other

49

70

47

-30%

4%

Technology infrastructure spend

437

577

483

-24%

-10%

Technology infrastructure spend by division

Half Year

Movement

Mar 15$M
136

Sep 14$M
165

Mar 14$M
149

Mar 15v. Sep 14-18%

Mar 15v. Mar 14-9%International and Institutional Banking

101

158

128

-36%

-21%

New Zealand

28

23

38

22%

-26%

Global Wealth

35

27

40

30%

-13%

GTSO and Group Centre

137

204

128

-33%

7%

Technology infrastructure spend

437

577

483

-24%

-10%

Australia

1.

Investment spend no longer includes technology infrastructure maintenance spend of $31 million (Sep 14 half: $56 million; Mar 14 half: $44 million), as infrastructure lifecycle management
is considered to be part of business-as-usual. There has been some re-allocation between categories in prior periods to align to revised category definitions.

The "Banking on Australia" program continues to be a key focus, building digital and data analytic capabilities. We have enhanced the customer
experience through delivering innovative digital and mobile solutions while enhancing security. This includes the launch of the world’s first Tap & PIN
ATMs delivering faster transactions and better security.
IIB investment focused on the continued development of Transaction Banking and Markets capabilities, scaling and optimising infrastructure to connect
with more customers and provide seamless value. Significant investment continued in risk and compliance projects to meet increasing regulatory
requirements across the region.
We have made significant investment in Payments Transformation, to deliver our customers a market leading experience by simplifying and modernising
our payments capability, and our Global Loan Management System, to further transform Wholesale Lending, standardising and simplifying our approach
to loan fulfilment, servicing and management.
Investment in technology continues to deliver a modern and secure technology foundation that is commensurate with ANZ’s user, customer and client
expectations. It offers simplification and flexibility for ANZ to rapidly change and deliver services globally, including hubs, in-line with our super regional
agenda.


March 2015 v March 2014

During the March 2015 half, the group continued to invest strongly with spend of $437 million. Cost efficiencies from greater utilisation of hubs andoutsourcing partners, along with the completion of some large programs of work in 2014 including the Core Banking System in Hong Kong, HR
Foundation and some Transaction Banking capabilities, has resulted in the reduction in investment spend compared to the March 2014 half.
March 2015 v September 2014

The decrease in investment spend when compared to the September 2014 half was driven by ongoing cost efficiencies from greater utilisation of hubs
and outsourcing partners, along with the completion of some large programs of work in 2014 including HR Foundation, some Transaction Banking
capabilities and significant Risk and Compliance initiatives.

44CFO OVERVIEW
Software capitalisation
As at 31 March 2015, the Group’s intangibles included $2,689 million in relation to costs incurred in acquiring and developing software. Details are set out
in the table below:
Half Year
Mar 15$M
2,533

Balance at start of period

Sep 14$M
2,332

Movement
Mar 14$M
2,170

Mar 15v. Sep 14
9%

Mar 15v. Mar 14
17%

Software capitalised during the period

350

415

362

-16%

-3%

Amortisation during the period

(267)

(221)

(205)

21%

30%

Software impaired/written-off

(4)

(14)

(1)

-71%

large

Foreign exchange differences

77

21

6

large

large

Total capitalised software

2,689

2,533

2,332

6%

15%

Capitalised cost analysis by Division

Half Year

Movement

Mar 15$M
93

Sep 14$M
115

Mar 14$M
104

Mar 15v. Sep 14-19%

International and Institutional Banking

100

153

94

-35%

6%

New Zealand

14

22

11

-36%

27%

Australia

Mar 15v. Mar 14-11%

Global Wealth

21

16

19

31%

11%

GTSO and Group Centre

122

109

134

12%

-9%

Total

350

415

362

-16%

-3%

Net book value by Division

Half Year

Movement

Australia

Mar 15$M
580

Sep 14$M
553

Mar 14$M
493

International and Institutional Banking1

Mar 15v. Sep 14
5%

Mar 15v. Mar 14
18%

1,091

998

904

9%

21%

New Zealand2

51

53

40

-4%

28%

Global Wealth

101

93

101

9%

0%

GTSO and Group Centre1,2

866

836

794

4%

9%

2,689

2,533

2,332

6%

15%

Total

1.
2.

GTSO and Group Centre transferred $20 million of assets to International and Institutional Banking during the March 2015 half.
New Zealand division transferred $15 million of assets to GTSO and Group Centre during the March 2015 half.

45

CFO OVERVIEWThis page has been left blank intentionally46

SEGMENT REVIEWCONTENTS

Section 5 – Segment Review
Segment performance
Australia
International and Institutional Banking (IIB)
New ZealandGlobal Wealth
Global Technology, Services and Operations (GTSO) and Group Centre

47

SEGMENT REVIEW
Segment Performance
The Group operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand, and Global Wealth being the major
operating divisions. The IIB and Global Wealth divisions are coordinated globally. GTSO and Group Centre provide support to the operating divisions,
including technology, operations, shared services, property, risk management, financial management, strategy, marketing, human resources andcorporate affairs. The Group Centre also includes Group Treasury and Shareholder Functions.
During the March 2015 half, the Merchant Services and Commercial Credit Cards businesses were transferred out of the Cards and Payments business
unit in Australia Retail and split between Australia C&CB and IIB based on customer ownership. Comparative information has been restated.
There have been no other major structure changes, however certain prior period comparatives have been restated to align with current period
presentation resulting from minor changes to customer segmentation and the realignment of support functions.
The Segment Review section is reported on a cash profit basis.
March 2015 Half Year

AUD M
Net interest income
Other operating income

Australia
3,670International &Institutional
Banking
2,027

New Zealand
1,161

Global Wealth88

GTSO andGroup Centre
192

Group
7,138

571

1,759

183

762

(228)

3,047

Operating income

4,241

3,786

1,344

850

(36)

10,185

Operating expenses(1,556)(1,771)

(539)

(489)

(238)

(4,593)

Profit before credit impair't and income tax

2,685

2,015

805

361

(274)

5,592

Credit impairment (charge)/release

(395)

(98)

(19)

1

1

(510)

Profit before income tax

2,290

1,917

786

362

(273)

5,082

Income tax expense and non-controlling interests

(688)

(458)

(220)

(103)

63

(1,406)

Cash profit

1,602

1,459

566

259

(210)

3,676

Australia
3,445International &Institutional
Banking
1,993

New Zealand
1,065

Global Wealth80

GTSO andGroup Centre
181

Group
6,764

March 2014 Half Year

AUD M
Net interest income
Other operating income

556

1,629

178

727

(186)

2,904

Operating income

4,001

3,622

1,243

807

(5)

9,668

Operating expenses(1,479)(1,627)

(513)

(484)

(183)

(4,286)
5,382

Profit before credit impair't and income tax

2,522

1,995

730

323

(188)

Credit impairment (charge)/release

(402)

(162)

34

1

1

(528)

Profit before income tax

2,120

1,833

764

324

(187)

4,854

Income tax expense and non-controlling interests

(637)

(465)

(214)

(90)

67

(1,339)Cash profit

1,483

1,368

550

234

(120)

3,515

Australia
7%International &Institutional
Banking2%

New Zealand
9%

Global Wealth
10%

GTSO andGroup Centre
6%

Group
6%

3%

8%

3%

5%

23%

5%

March 2015 Half Year vs March 2014 Half Year

AUD M
Net interest income
Other operating income
Operating income

6%

5%

8%

5%

large

5%

Operating expenses

5%

9%

5%

1%

30%

7%

Profit before credit impair't and income tax

6%

1%

10%

12%

46%

4%

Credit impairment (charge)/release

-2%

-40%

large

0%

0%

-3%

Profit before income tax

8%

5%

3%

12%

46%

5%

Income tax expense and non-controlling interests

8%

-2%

3%

14%

-6%

5%

Cash profit

8%

7%

3%

11%

75%

5%

48

SEGMENT REVIEWMarch 2015 Half Year

AUD M
Net interest income
Other operating income

Australia
3,670International &Institutional
Banking
2,027

New Zealand
1,161

Global Wealth88

GTSO andGroup Centre
192

Group
7,138

571

1,759

183

762

(228)

3,047

Operating income

4,241

3,786

1,344

850

(36)

10,185

Operating expenses(1,556)(1,771)

(539)

(489)

(238)

(4,593)

Profit before credit impair't and income tax

2,685

2,015

805

361

(274)

5,592

Credit impairment (charge)/release

(395)

(98)

(19)

1

1

(510)

Profit before income tax

2,290

1,917

786

362

(273)

5,082

Income tax expense and non-controlling interests

(688)

(458)

(220)

(103)

63

(1,406)

Cash profit

1,602

1,459

566

259

(210)

3,676

Australia
3,632International &Institutional
Banking
2,016

New Zealand
1,106

Global Wealth88

GTSO andGroup Centre
191

Group
7,033

September 2014 Half Year

AUD M
Net interest income
Other operating income

560

1,467

171

850

(171)

2,877

Operating income

4,192

3,483

1,277

938

20

9,910

Operating expenses(1,536)(1,655)

(518)

(520)

(245)

(4,474)

Profit before credit impair't and income tax

2,656

1,828

759

418

(225)

5,436

Credit impairment (charge)/release

(416)

(54)

(26)

1

34

(461)

Profit before income tax

2,240

1,774

733

419

(191)

4,975

Income tax expense and non-controlling interests

(669)

(439)

(205)

(111)

51

(1,373)

Cash profit

1,571

1,335

528

308

(140)

3,602

Australia
1%International &Institutional
Banking
1%

New Zealand
5%

Global Wealth0%

GTSO andGroup Centre
1%

Group
1%

Other operating income

2%

20%

7%

-10%

33%

6%

Operating income

1%

9%

5%

-9%

large

3%

Operating expenses

1%

7%

4%

-6%

-3%

3%

Profit before credit impair't and income tax

1%

10%

6%

-14%

22%

3%

Credit impairment (charge)/release

-5%

81%

-27%

0%

-97%

11%

March 2015 Half Year vs September 2014 Half Year

AUD M
Net interest income

Profit before income tax

2%

8%

7%

-14%

43%

2%

Income tax expense and non-controlling interests

3%

4%

7%

-7%

24%

2%

Cash profit

2%

9%

7%

-16%

50%

2%

49

SE
EGMENT REVIIEW
Australia
Ma
ark WhelanThee Australia Divisio
on comprises thee Retail and Corp
porate and Comm
mercial Banking (C&CB) busines
ss units.
Cas
sh profit – Marc
ch 2015 Half Yea
ar v March 2014
4 Half YearMarch 2015 v March 2014

Ban
nking on Austra
alia TransformationCa
ash profit increas
sed 8%, with 6% income growth, a 5% increase innex
xpenses and a 2%
% decrease in crredit impairment charges.

“Baanking on Australlia” is transforminng our Retail andd Corporate &Com
mmercial businessses based on a deep understan
nding of customeerneeeds. We have delivered a strong performance withh contributions
fromm all core segme
ents.

Ke
ey factors affectinng the result werre:We
e continue to build
d our sales reachh through expand
ding our sales
forc
ce and investing in the capability of our frontline. We
W have improveed
ourr distribution netw
works, enabling ouro frontline bankkers to have morrehighh quality interacttions, and making
g it easier for ourr customers to baank
with
h us.
We
e have enhanced the customer exxperience through deliveringinno
ovative digital annd mobile solutions, providing con
nnectivity andalloowing customers more control ove
er their banking needs.
n74%1 oftran
nsactions now occcur through digital channels and we have launchhedthe world’s first Tap
p & PIN ATMs deelivering faster traansactions andbettter security.
Wee have simplified our products andd processes to fu
urther improve thhecusstomer experiencce and manage ouro costs. The productivity achievved
as a result of the disstribution transfo
ormation, digital innvestment andsim
mplification has be
een reinvested inn building our salles reach,incrreasing our saless capability and investing in our key
k customer andd
indu
ustry segments.

•

Net interest inncome increasedd 7% primarily duue to strong volume
growth from HomeH
Loans, Caards and Small Business
B
Bankingg,
and discipline
ed deposit pricingg to manage lend
ding margin
contraction frrom competitive ppressures.

•

Operating expenses increaseed 5%.This was primarilyp
due toBanking on AustraliaA
investmeents to increase our sales reach andsales capability, investment inn our digital capa
abilities and wagee
inflation.

•

Credit impairment charges deecreased 2%, witth a lower individ
dual
impairment charge offsetting a higher collectiv
ve charge. The
lower individu
ual charge reflect
cts improved perfformance inCorporate Ba
anking, offset by higher charges in Esanda andBusiness Ban
nking. The collecctive charge increease reflects model
improvements in Esanda andd growth in Consu
umer Cards.

March 2015 v September 20114Ca
ash profit increas
sed 2%, with 1% income growth, a 1% increase innopperating expensees and a 5% decrrease in credit im
mpairment chargees.
Keey factors affectinng the result werre:

Rettail has had anotther strong half. Volumes
Vcontinue to grow abovesys
stem and marginss have been welll managed. We havehconsistentlyy
grown Home Loanss and delivered 5 consecutive yea
ars of abovesys
stem growth2. Re
etail deposits con
ntinue to grow and mix has
imp
proved. We have 3% more Retail customers and increased
i
the
num
mber of Retail pro
oducts held per customer.
c
C&CB continues to grow its businesss, targeting key growth segmentss
andd supporting custtomers across th
he region. Lending grew 4% and ttheSmmall Business Ban
nking segment iss performing stronngly with lendingg
up 15%, aided by A
ANZ’s $2 billion leending pledge annd investing for
growth. Other busin
ness foundations remain strong withw deposits
growing 6%. We ha
ave maintained our cost disciplinee and underlyingass
set quality remain
ns sound.

50•

Despite comppetition, net loanss and advances and deposits groowth
was strong in
n the half, with Hoome Loans, Card
ds & Payments,
Retail Deposits and Small Buusiness Banking contributingcstrongly. Net interest margin ccontracted 4 bps
s, reflecting
increased lennding competitionn and portfolio mix,m partially offse
et bydisciplined deeposit pricing.

•Operating expenses were lim
mited to 1% growtth. Investment insales reach anda sales capabi lity continued in the March 2015
half, while ma
aintaining a stablle operating expe
ense to operatingg
income ratio.

•

Credit impairment charges deecreased 5%, witth a lower individ
dual
impairment charge offsetting a higher collectiv
ve charge. The
lower individu
ual charge reflect
cts improved perfformance inConsumer Ca
ards, Corporate B
Banking and Reg
gional BusinessBanking, offset by higher chaarges in Esanda. The collective
charge increa
ase reflects modeel improvementss in Esanda andgrowth across the Retail segm
ment, primarily inn Consumer Cardds.

1

Refers to value traansactions through thhe internet, mobile, teeller and ATM’s.

2

Source: APRA Mo
onthly Banking Statisstics as at 31 Decembber 2014.

SEGMENT REVIEW
Australia
Mark Whelan

Half Year
Mar 15$M
3,670

Net interest income

Sep 14$M
3,632

Movement
Mar 14$M
3,445

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
7%

571

560

556

2%

3%

Operating income

4,241

4,192

4,001

1%

6%

Operating expenses(1,556)(1,536)(1,479)1%

5%Profit before credit impairment and income tax

2,685

2,656

2,522

1%

6%

Credit impairment charge

(395)

(416)

(402)

-5%

-2%

Other operating income

Profit before income tax

2,290

2,240

2,120

2%

8%

Income tax expense and non-controlling interests

(688)

(669)

(637)

3%

8%

Cash profit

1,602

1,571

1,483

2%

8%

956

943

887

1%

8%

Consisting of:RetailCorporate and Commercial Banking

646

628

596

3%

8%

1,602

1,571

1,483

2%

8%

Balance Sheet
Net loans & advances

297,642

287,750

278,120

3%

7%

Other external assets

2,885

2,814

2,912

3%

-1%

External assets

300,527

290,564

281,032

3%

7%

Customer deposits

162,587

160,683

156,080

1%

4%Cash profit

Other external liabilities

11,41011,997

12,330-5%-7%

External liabilities

173,997

172,680

168,410

1%

3%

Risk weighted assets

116,386

110,752

109,077

5%

7%

Average gross loans and advances

294,357

284,763276,626

3%

6%

Average deposits and other borrowings

162,688

157,756

155,073

3%

5%

RatiosReturn on assets

1.09%

1.10%

1.07%

Net interest margin

2.50%

2.54%

2.50%

Operating expenses to operating income

36.7%

36.6%

37.0%

Operating expenses to average assets

1.06%

1.07%

1.07%

334

413

374

-19%

-11%

0.23%

0.29%

0.27%

61

3

28

large

large

Collective credit impairment charge/(release) as a % of average GLA

0.04%

0.00%

0.02%

Gross impaired assets

1,245

1,253

1,463

-1%

-15%

Gross impaired assets as a % of GLA

0.42%

0.43%

0.52%

Total full time equivalent staff (FTE)

10,586

10,245

9,907

3%

7%

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)51

SEGMENT REVIEW
Australia
Mark Whelan
Individual credit impairment charge/(release)

Half Year
Mar 15$M
158

RetailHome Loans
Cards & Payments
Deposits1
Corporate and Commercial Banking

Sep 14$M
177

Movement
Mar 14$M
161

Mar 15v. Sep 14-11%

Mar 15v. Mar 14
-2%

6

11

13

-45%

-54%

144

153

140

-6%

3%

8

13

8

-38%

0%

176

236

213

-25%

-17%

Corporate Banking

(18)

39

70

large

large

Esanda

100

84

70

19%

43%

Regional Business Banking

20

38

21

-47%

-5%

Business Banking

24

24

4

0%

large

Small Business Banking
Individual credit impairment charge/(release)

50

51

48

-2%

4%

334

413

374

-19%

-11%

Collective credit impairment charge/(release)

Half Year
Mar 15$M
37

Sep 14$M
8Home Loans

11

Cards & Payments

25

Retail

Deposits2

Movement
Mar 14$M
7

Mar 15v. Sep 14
large

Mar 15v. Mar 14
large

5

9

large

22%

5

(4)

large

large
-50%

1

(2)

2

large

24

(5)

21

large

14%

Corporate Banking

(29)

(18)

10

61%

large

Esanda

27

1

(2)

large

large

Regional Business Banking

12

2

(4)

large

large

Business Banking

(1)

(1)

2

0%

large

Small Business Banking

15

11

15

36%

0%

Collective credit impairment charge/(release)

61

3

28

large

large

Total credit impairment charge/(release)

395

416

402

-5%

-2%

Corporate and Commercial Banking

1.
2.

Represents individual credit impairment charge/(release) on Overdraft balances.
Represents collective credit impairment charge/(release) on Overdraft balances.

52

SEGMENT REVIEW
Australia
Mark Whelan
Net loans and advances

Half Year
Mar 15$M
229,211

Sep 14$M
220,164

Mar 14$M
212,462

Home Loans

217,977

209,391

201,646

4%

8%

Cards & Payments

11,13910,68010,7204%

4%Retail

Deposits1

93

96

2%

-1%

67,58665,6581%

4%

Corporate Banking

9,661

9,389

9,074

3%

6%

Esanda15,77616,14916,297-2%-3%

Regional Business Banking

12,35912,602

11,988-2%

3%

Business Banking

17,15016,774

16,577

2%

3%

Small Business Banking

13,485

12,672

11,7226%

15%297,642

287,750

278,120

3%

7%

Customer deposits

Half Year

Movement
Mar 15v. Sep 14
1%

Mar 15v. Mar 14
3%

16,308

9%

18%

224

-6%

3%

94,03392,742-1%

1%49,681

48,72146,806

2%

6%

-

1

1

-100%

-100%

Regional Business Banking

4,693

4,964

4,955

-5%

-5%

Business Banking

14,136

14,03813,041

1%

8%

Small Business Banking

30,852

29,71828,8094%

7%

162,587

160,683

156,0801%

4%RetailHome Loans2
Cards & Payments
Deposits
Corporate and Commercial Banking3
EsandaCustomer deposits

3.

Mar 15v. Mar 14
8%95

Net loans and advances

2.

Mar 15v. Sep 14
4%68,431

Corporate and Commercial Banking

1.

Movement

Net loans and advances for the Deposits business represents amounts in overdraft.
Customer deposit amounts for the Home Loans business represents balances in offset accounts.
Corporate Banking deposits are included in the International and Institutional Banking division deposits.

53

Mar 15$M
112,906

Sep 14$M
111,962

Mar 14$M
109,274

19,211

17,684230

245

93,465

SEGMENT REVIEW
Australia
Mark Whelan
RetailMovement

Half Year
Mar 15$M
2,219

Net interest income
Other operating income

Sep 14$M
2,188

Mar 14$M
2,042

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
9%

357

342

347

4%

3%

Operating income

2,576

2,530

2,389

2%

8%

Operating expenses(1,015)(1,002)

(955)

1%

6%

Profit before credit impairment and income tax

1,561

1,528

1,434

2%

9%

Credit impairment charge

(195)

(185)

(168)

5%

16%

Profit before income tax

1,366

1,343

1,266

2%

8%

Income tax expense and non-controlling interests

(410)

(400)

(379)

3%

8%

Cash profit

956

943

887

1%

8%

57,30453,36752,166

7%

10%

Risk weighted assets

Half Year

Movement

Mar 15$M
6

Sep 14$M
11

Mar 14
$M
13

144

153

140

-6%

3%

8

13

8

-38%

0%

Individual credit impairment charge/(release)

158

177

161

-11%

-2%

Collective credit impairment charge/(release)
Home Loans

Individual credit impairment charge/(release)
Home Loans
Cards & Payments
Deposits1

Mar 15v. Sep 14-45%

Mar 15v. Mar 14
-54%

11

5

9

large

22%

Cards & Payments

25

5

(4)

large

large

Deposits2

1

(2)

2

large

-50%

Collective credit impairment charge/(release)

37

8

7

large

large

Total credit impairment charge/(release)

195

185

168

5%

16%

Half Year

Movement

Net loans and advancesHome Loans

Mar 15$M
217,977

Sep 14$M
209,391

Mar 14$M
201,646

Mar 15v. Sep 14
4%

Mar 15v. Mar 14
8%

Cards & Payments

11,13910,68010,7204%

4%

Deposits
Net loans and advances

95

93

96

2%

-1%

229,211220,164

212,4624%

8%

19,211

17,68416,3089%

18%
3%

Customer deposits
Home Loans
Cards & Payments
Deposits
Customer deposits
1.
2.

Represents individual credit impairment charge/(release) on Overdraft balances.
Represents collective credit impairment charge/(release) on Overdraft balances.

54

230

245

224

-6%

93,46594,03392,742-1%

1%

112,906

111,962

109,274

1%

3%

SEGMENT REVIEW
Australia
Mark Whelan
Corporate and Commercial Banking
Movement

Half Year
Mar 15$M
1,451

Net interest income
Other operating income

Sep 14$M
1,444

Mar 14$M
1,403

Mar 15v. Sep 14
0%

Mar 15v. Mar 14
3%

214

218

209

-2%

2%

Operating income

1,665

1,662

1,612

0%

3%

Operating expenses

(541)

(534)

(524)

1%

3%

Profit before credit impairment and income tax

1,124

1,128

1,088

0%

3%

Credit impairment charge

(200)

(231)

(234)

-13%

-15%

Profit before income tax

924

897

854

3%

8%

Income tax expense and non-controlling interests

(278)

(269)

(258)

3%

8%

Cash profit

646

628

596

3%

8%

59,08056,28655,747

5%

6%

Risk weighted assets

Half Year
Mar 15$M(18)

Individual credit impairment charge/(release)
Corporate Banking

Sep 14$M
39

Movement
Mar 14$M
70

Mar 15v. Sep 14
large

Mar 15v. Mar 14
large
43%

Esanda

100

84

70

19%

Regional Business Banking

20

38

21

-47%

-5%

Business Banking

24

24

4

0%

large

50

51

48

-2%

4%

Individual credit impairment charge/(release)

176

236

213

-25%

-17%

Collective credit impairment charge/(release)
Corporate Banking

(29)

(18)

10

61%

large

Small Business Banking

Esanda

27

1

(2)

large

large

Regional Business Banking

12

2

(4)

large

large

Business Banking

(1)

(1)

2

0%

large

Small Business Banking

15

11

15

36%

0%

Collective credit impairment charge/(release)

24

(5)

21

large

14%

Total credit impairment charge/(release)

200

231

234

-13%

-15%

Half Year

Movement

Mar 15$M
9,661

Sep 14$M
9,389

Mar 14$M
9,074

Mar 15v. Sep 14
3%

Mar 15v. Mar 14
6%

Esanda15,77616,14916,297-2%-3%

Regional Business Banking

12,35912,602

11,988-2%

3%

Business Banking

17,15016,774

16,577

2%

3%

Small Business Banking

13,485

12,672

11,7226%

15%68,431

67,58665,658

1%

4%

-

1

1

-100%

-100%

Net loans and advances
Corporate Banking

Net loans and advances
Customer deposits1
EsandaRegional Business Banking

4,693

4,964

4,955

-5%

-5%

Business Banking

14,136

14,03813,041

1%

8%

Small Business Banking

30,852

29,71828,8094%

7%49,681

48,72146,8062%

6%

Customer deposits
1.

Corporate Banking deposits are included in the International and Institutional Banking division deposits.

55

SE
EGMENT REVIIEW
Inteernational and Institutional Banking
BAnddrew Géczy
Thee International an
nd Institutional Banking (IIB) divis
sion comprises G
Global Products, Retail Asia Paciffic and Asia Partnnerships. IIB serrvices three mainncusstomer segmentss: Global Banking, International Banking
Band Reta
tail Asia Pacific. Global
G
Banking servessinstitutionaal customers with multi-product andamulti-geographic req
quirements, International Banking serves institutioonal customers withw less complex needs and Rettail Asia Pacific focusesf
on afflueent
andd emerging afflue
ent customers accross 21 countriees.
Cas
sh profit – Marc
ch 2015 Half Yea
ar v March 2014
4 Half Yearcredit impairm
ment releases in Global Loans an
nd Advisory andRetail Asia Pacific.

IIB’s four key strateg
gic priorities are:: Connecting withh more customerrspseamleess value, Delive
ering leading prod
ducts throughby providing
Insiights, Intensifying
g balance sheet discipline and Sc
caling & Optimis ing
infrastructure.

Caash profit increas
sed 9%, driven pprimarily by an inccrease in otheropperating income in Global Marketss and Asia Partnnerships, partiallyy
offfset by an increase in operating eexpenses and cre
edit impairment
chharges.

Thee customer francchise continues too strengthen. In Asia,
Ain the recenntly
pub
blished results off the 2014 Green
nwich relationshipp strength surveyy,
ANZ
Z has maintainedd its number fourr position for Corrporate Banking,andd significantly narrrowed the gap to the number thrree bank.
Keey factors affectinng the result werre:

March 2015 v M
March 2014•

Net interest inncome increasedd 1%, with an inccrease in Retail Asia
A
Pacific partly offset by a decreease in Global Markets.
M
Averageedeposits and other borrowingss increased 8% and average groossloans and advances increaseed 4%. Increased
d volumes wereoffset by marrgin decline. Nett interest margin declined by 12 bps
bdriven largely
y by Global Loanns in Australia due to pricecompetition anda excess liquiddity, and Global Markets
Mfrom achange in thee mix of liquid hooldings to lower marginmbonds.

•

Other operatiing income increa
eased 20% with strongsperformannce
across most lines of businesss. Global Marketss other operatingg
income increa
ased due to stronnger customer flow driven byincreased FX
X and Interest Raate volatility. Pay
yments and CashhManagementt and Retail Asia Pacific increaseed mainly due tovolume growtth and Asia Partnnerships increased reflecting thestrong performance of our eq uity investments.

•

Operating expenses increaseed 7%. The increase was driven
largely by inv
vestment in key innfrastructure proojects, partially offfset
by $40 millionn spend in Septeember 2014 half associated with thetintegration off the new IIB orgaanisational structure andtransformatio
on workstreams.

•

Credit impairment charges inccreased 81%, prrimarily due toincreased ind
dividual credit imppairment charge in March 2015 halfhand to higherr collective provission releases in thet September 20142
half from improved customer credit ratings.

Cas
sh profit increase
ed by 7%, primarrily driven by an increaseiin otherr
ope
erating income annd a reduction inn credit impairme
ent charges,
parrtially offset by ann increase in ope
erating expensess.
Keyy factors affecting
g the result weree:••

Net interest income increased 2%. Average deeposits and otherr
borrowings inccreased 13% andd average gross loans andadvances incrreased 14%. Thee increase in net interest incomeaall lines of business andwas driven by volume growth acrossgeographies, aand partially offset by a net intere
est margin declinneof 21 bps, drivven mainly by Glo
obal Loans in Au
ustralia due to priice
competition annd excess liquiditty.
Other operatin
ng income increa
ased by 8%, drive
en by increased
Payments andd Cash Managem
ment fees reflecting deposit volummegrowth in all geographies, incre
eased Global Ma
arkets income
across our cusstomer franchisee, revenue growthh in Asia
Partnerships aand higher Investtment and Insura
ance income in
Retail Asia Pa
acific from a large
er product suite.

•

Operating exp
penses increased
d by 9%. The increase was drivenn
largely by inve
estment in key infrastructure proje
ects.

•

Credit impairm
ment charges deccreased 40%, duue to lower
individual cred
dit impairment ch
harges in Global Transaction
T
Banking and R
Retail Asia Pacific, offset in part byb lower collectivve

March 2015 v September 20114

56

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy

Half Year

Movement

Net interest income

Mar 15$M
2,027

Sep 14$M
2,016

Mar 14$M
1,993

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
2%

Other operating income

1,759

1,467

1,629

20%

8%

Operating income

3,786

3,483

3,622

9%

5%

Operating expenses(1,771)(1,655)(1,627)

7%

9%

Profit before credit impairment and income tax

2,015

1,828

1,995

10%

1%

Credit impairment charge

(98)

(54)

(162)

81%

-40%

Profit before income tax

1,917

1,774

1,833

8%

5%

Income tax expense and non-controlling interests

(458)

(439)

(465)

4%

-2%

Cash profit

1,459

1,335

1,368

9%

7%

Consisting of:
Global Transaction Banking

305

336

221

-9%

38%

Global Loans and Advisory

394

429

432

-8%

-9%

Global Markets

421

386

455

9%

-7%

1,120

1,151

1,108

-3%

1%

Retail Asia Pacific

56

1

45

large

24%

Asia Partnerships

299

246

242

22%

24%

Central Functions

(16)

(63)

(27)

-75%

-41%

1,459

1,335

1,368

9%

7%

Balance Sheet
Net loans & advances

156,517

141,986

136,492

10%

15%

Other external assets

248,540

200,999

178,168

24%

39%

External assets

405,057

342,985

314,660

18%

29%

Customer deposits

201,124

183,126

172,252

10%

17%

Other deposits and borrowings

51,681

39,604

38,17230%

35%

Deposits and other borrowings

252,805

222,730

210,424

14%

20%

Other external liabilities

93,71278,367

61,68320%

52%

External liabilities

346,517

301,097

272,107

15%

27%

Risk weighted assets

206,254

191,286

190,325

8%

8%

Average gross loans and advances

153,399

147,810134,029

4%

14%

Average deposits and other borrowings

244,050

226,409

216,303

8%

13%

RatiosReturn on assets

0.75%

0.80%

0.87%

Net interest margin

1.34%

1.46%

1.55%

Net interest margin (excluding Global Markets)

2.32%

2.39%

2.51%

Operating expenses to operating income

46.8%

47.5%

44.9%

Operating expenses to average assets

0.92%

0.99%

1.03%

100

75

215

33%

-53%

0.13%

0.10%

0.32%
-90%

-96%

-7%

-31%

0%

-4%

Global Products

Cash profit

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA

(2)

(21)

(53)

Collective credit impairment charge/(release) as a % of average GLA

Collective credit impairment charge/(release)(0.00%)(0.03%)(0.08%)

Gross impaired assets

1,021

1,093

1,471

Gross impaired assets as a % of GLA

0.65%

0.76%

1.06%

Total full time equivalent staff (FTE)

7,802

7,768

8,145

57

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy
International and Institutional Banking by Geography
Movement

Half Year
Mar 15$M
967

Australia
Net interest income
Other operating income

Sep 14$M
1,019

Mar 14$M993

Mar 15v. Sep 14-5%

Mar 15v. Mar 14
-3%

445

433

474

3%

-6%

Operating income

1,412

1,452

1,467

-3%

-4%

Operating expenses

(618)

(598)

(579)

3%

7%

Profit before credit impairment and income tax

794

854

888

-7%

-11%

Credit impairment (charge)/release

(34)

3

(78)

large

-56%

Profit before income tax

760

857

810

-11%

-6%

Income tax expense and non-controlling interests

(228)

(252)

(245)

-10%

-7%

Cash profit

532

605

565

-12%

-6%

Individual credit impairment charge/(release)

41

20

81

large

-49%

Collective credit impairment charge/(release)

(7)

(23)

(3)

-70%

large

Net loans & advances

62,491

57,96855,262

8%

13%

Customer deposits

62,61067,072

61,120-7%

2%Asia Pacific, Europe, and America
Net interest income

930

857

838

9%

11%

Other operating income

1,131

890

1,026

27%

10%

Operating income

2,061

1,747

1,864

18%

11%

Operating expenses(1,066)

(975)

(963)

9%

11%

Profit before credit impairment and income tax

995

772

901

29%

10%

Credit impairment (charge)/release

(54)

(55)

(85)

-2%

-36%
15%

Profit before income tax

941

717

816

31%

Income tax expense and non-controlling interests

(170)

(131)

(163)

30%

4%

Cash profit

771

586

653

32%

18%

Individual credit impairment charge/(release)

47

48

127

-2%

-63%

Collective credit impairment charge/(release)

7

7

(42)

0%

large

Net loans & advances

86,47477,53374,791

12%

16%

Customer deposits

125,234

103,992

98,40220%

27%

Net interest income

130

140

162

-7%

-20%
42%

New Zealand

Other operating income

183

144

129

27%

Operating income

313

284

291

10%

8%

Operating expenses

(87)

(82)

(85)

6%

2%

Profit before credit impairment and income tax

226

202

206

12%

10%

Credit impairment (charge)/release

(10)

(2)

1

large

large

Profit before income tax

216

200

207

8%

4%

Income tax expense and non-controlling interests

(60)

(56)

(57)

7%

5%

Cash profit

156

144

150

8%

4%

Individual credit impairment charge/(release)

12

7

7

71%

71%

Collective credit impairment charge/(release)

(2)

(5)

(8)

-60%

-75%

Net loans & advances

7,552

6,485

6,439

16%

17%

Customer deposits

13,28012,061

12,730

10%

4%

58

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy
Half Year

Individual credit impairment charge/(release)

Retail Asia Pacific
Global Products

Movement

Mar 15$M
9

Sep 14$M
48

Mar 14$M
38

Mar 15v. Sep 14-81%

Mar 15v. Mar 14
-76%

91

27

176

large

-48%

Global Transaction Banking

19

12

101

58%

-81%

Global Loans and Advisory

33

13

54

large

-39%

Global Markets

39

2

21

large

86%

Central Functions
Individual credit impairment charge/(release)

-

-

1

n/a

-100%

100

75

215

33%

-53%

Half Year

Collective credit impairment charge/(release)
Mar 15$M
2

Retail Asia PacificMovement

Sep 14$M
10

Mar 14$M(31)

Mar 15v. Sep 14-80%

Mar 15v. Mar 14
large

(5)

(30)

(23)

-83%

-78%

Global Transaction Banking

(1)

(16)

19

-94%

large

Global Loans and Advisory

(4)

(14)

(43)

-71%

-91%

Global Markets

-

-

1

n/a

-100%

Global Products

Central Functions

1

(1)

1

large

0%

Collective credit impairment charge/(release)

(2)

(21)

(53)

-90%

-96%

Total credit impairment charge/(release)

98

54

162

81%

-40%

Half YearNet loans and advances

Movement

Retail Asia Pacific

Mar 15$M
10,160

Sep 14$M
8,782

Mar 14$M
7,866

Mar 15v. Sep 14
16%

Mar 15v. Mar 14
29%

Global Products

14%

146,080

132,950

128,335

10%

Global Transaction Banking

32,801

30,23030,9289%

6%Global Loans and Advisory

91,12984,191

82,1358%

11%

Global Markets

22,15018,52915,272

20%

45%

Central Functions

277

254

291

9%

-5%

156,517

141,986

136,492

10%15%

Net loans and advances

Half Year

Customer deposits

Movement

Retail Asia Pacific

Mar 15$M
16,233

Sep 14$M
14,433

Mar 14$M
13,401

Mar 15v. Sep 14
12%

Mar 15v. Mar 14
21%

Global Products

184,733

168,542

158,708

10%

16%

Global Transaction Banking

92,87586,43881,306

7%

14%

Global Loans and Advisory

792

730

896

8%

-12%

Global Markets

91,066

81,37476,506

12%

19%

Central Functions

158

151

143

5%

10%

Customer deposits

201,124

183,126

172,252

10%

17%

59

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy
March 2015 Half Year

AUD M
Net interest income

GlobalTransaction
Banking478

GlobalLoans &
Advisory
778

GlobalMarkets
505

Global Retail Asia
Products
Pacific
1,761
262

Asia
Partnerships(3)

Central
Functions
7

IIB Total
2,027
1,759

Other operating income

427

67

737

1,231

199

311

18

Operating income

905

845

1,242

2,992

461

308

25

3,786

Operating expenses

(463)

(275)

(633)

(1,371)

(383)

(4)

(13)

(1,771)

Profit before credit impair't and income tax

442

570

609

1,621

78

304

12

2,015

Credit impairment (charge)/release

(18)

(29)

(39)

(86)

(11)

-

(1)

(98)

Profit before income tax

424

541

570

1,535

67

304

11

1,917

Income tax expense and non-controlling interests

(119)

(147)

(149)

(415)

(11)

(5)

(27)

(458)

Cash profit

305

394

421

1,120

56

299

(16)

1,459

Individual credit impairment (charge)/release

(19)

(33)

(39)

(91)

(9)

-

-

(100)

Collective credit impairment (charge)/release

1

4

-

5

(2)

-

(1)

2

Net loans & advances

32,801

91,12922,150146,080

10,160-277

156,517

Customer deposits

92,875792

91,066

184,733

16,233-

158

201,124

Risk weighted assets

41,51296,362

59,676

197,550

8,145

-

559

206,254

March 2014 Half YearNet interest income

453

805

508

1,766

227

(3)

3

1,993

Other operating income

408

72

720

1,200

177

252

-

1,629

Operating income

861

877

1,228

2,966

404

249

3

3,622

Operating expenses

(431)

(264)

(584)

(1,279)

(343)

(4)

(1)

(1,627)

Profit before credit impair't and income tax

430

613

644

1,687

61

245

2

1,995

Credit impairment (charge)/release

(120)

(11)

(22)

(153)

(7)

-

(2)

(162)

Profit before income tax

310

602

622

1,534

54

245

-

1,833

Income tax expense and non-controlling interests

(89)

(170)

(167)

(426)

(9)

(3)

(27)

(465)

Cash profit

221

432

455

1,108

45

242

(27)

1,368

Individual credit impairment (charge)/release

(101)

(54)

(21)

(176)

(38)

-

(1)

(215)

Collective credit impairment (charge)/release

(19)

43

(1)

23

31

-

(1)

53

Net loans & advances

30,92882,135

15,272

128,335

7,866

-

291

136,492

Customer deposits

81,306896

76,506

158,708

13,401-

143

172,252

Risk weighted assets1

38,67089,621

54,734

183,025

6,784

-

516

190,325

March 2015 Half Year vs March 2014 Half YearNet interest income

6%

-3%

-1%

0%

15%

0%

large

2%

Other operating income

5%

-7%

2%

3%

12%

23%

n/a

8%

Operating income

5%

-4%

1%

1%

14%

24%

large

5%

Operating expenses

7%

4%

8%

7%

12%

0%

large

9%

Profit before credit impair't and income tax

3%

-7%

-5%

-4%

28%

24%

large

1%
-40%

Credit impairment (charge)/release

-85%

large

77%

-44%

57%

n/a

-50%

Profit before income tax

37%

-10%

-8%

0%

24%

24%

n/a

5%

Income tax expense and non-controlling interests

34%

-14%

-11%

-3%

22%

67%

0%

-2%

Cash profit

38%

-9%

-7%

1%

24%

24%

-41%

7%

Individual credit impairment (charge)/release

-81%

-39%

86%

-48%

-76%

n/a

-100%

-53%

Collective credit impairment (charge)/release

large

-91%

-100%

-78%

large

n/a

0%

-96%

Net loans & advances

6%

11%

45%

14%

29%

n/a

-5%

15%

Customer deposits

14%

-12%

19%

16%

21%

n/a

10%

17%

Risk weighted assets

7%

8%

9%

8%

20%

n/a

8%

8%

1.

Global Loans & Advisory includes risk weighted assets for Pacific Commercial customers previously reported under Central Functions (Sep 14: $114 million; Mar 14: $869 million).

60

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy
March 2015 Half Year

AUD M
Net interest income

GlobalTransaction
Banking478

GlobalLoans &
Advisory
778

GlobalMarkets
505

Global Retail Asia
Products
Pacific
1,761
262

Asia
Partnerships(3)

Central
Functions
7

IIB Total
2,027
1,759

Other operating income

427

67

737

1,231

199

311

18

Operating income

905

845

1,242

2,992

461

308

25

3,786

Operating expenses

(463)

(275)

(633)

(1,371)

(383)

(4)

(13)

(1,771)

Profit before credit impair't and income tax

442

570

609

1,621

78

304

12

2,015

Credit impairment (charge)/release

(18)

(29)

(39)

(86)

(11)

-

(1)

(98)

Profit before income tax

424

541

570

1,535

67

304

11

1,917

Income tax expense and non-controlling interests

(119)

(147)

(149)

(415)

(11)

(5)

(27)

(458)

Cash profit

305

394

421

1,120

56

299

(16)

1,459

Individual credit impairment (charge)/release

(19)

(33)

(39)

(91)

(9)

-

-

(100)

Collective credit impairment (charge)/release

1

4

-

5

(2)

-

(1)

2

Net loans & advances

32,801

91,12922,150146,080

10,160-277

156,517

Customer deposits

92,875792

91,066

184,733

16,233-

158

201,124

Risk weighted assets

41,51296,362

59,676

197,550

8,145

-

559

206,254

September 2014 Half YearNet interest income

472

780

535

1,787

230

(2)

1

2,016

Other operating income

408

68

565

1,041

183

240

3

1,467

Operating income

880

848

1,100

2,828

413

238

4

3,483

Operating expenses

(424)

(255)

(564)

(1,243)

(352)

(4)

(56)

(1,655)

Profit before credit impair't and income tax

456

593

536

1,585

61

234

(52)

1,828

4

1

(2)

3

(58)

-

1

(54)

Profit before income tax

460

594

534

1,588

3

234

(51)

1,774

Income tax expense and non-controlling interests

(124)

(165)

(148)

(437)

(2)

12

(12)

(439)

Cash profit

336

429

386

1,151

1

246

(63)

1,335

Individual credit impairment (charge)/release

(12)

(13)

(2)

(27)

(48)

-

-

(75)

Collective credit impairment (charge)/release

16

14

-

30

(10)

-

1

21

Net loans & advances

30,23084,191

18,529132,950

8,782

-

254

141,986

Customer deposits

86,438730

81,374

168,542

14,433-

151

183,126

Risk weighted assets1

38,601

90,55354,348

183,502

7,307

-

477

191,286

Credit impairment (charge)/release

March 2015 Half Year vs September 2014 Half YearNet interest income

1%

0%

-6%

-1%

14%

50%

large

1%

Other operating income

5%

-1%

30%

18%

9%

30%

large

20%

Operating income

3%

0%

13%

6%

12%

29%

large

9%

Operating expenses

9%

8%

12%

10%

9%

0%

-77%

7%

Profit before credit impair't and income tax

-3%

-4%

14%

2%

28%

30%

large

10%

Credit impairment (charge)/release

large

large

large

large

-81%

n/a

large

81%

Profit before income tax

-8%

-9%

7%

-3%

large

30%

large

8%

Income tax expense and non-controlling interests

-4%

-11%

1%

-5%

large

large

large

4%

Cash profit

-9%

-8%

9%

-3%

large

22%

-75%

9%

Individual credit impairment (charge)/release

58%

large

large

large

-81%

n/a

n/a

33%

Collective credit impairment (charge)/release

-94%

-71%

n/a

-83%

-80%

n/a

large

-90%

Net loans & advances

9%

8%

20%

10%

16%

n/a

9%

10%

Customer deposits

7%

8%

12%

10%

12%

n/a

5%

10%

Risk weighted assets

8%

6%

10%

8%

11%

n/a

17%

8%

1.

Global Loans & Advisory includes risk weighted assets for Pacific Commercial customers previously reported under Central Functions (Sep 14: $114 million; Mar 14: $869 million).

61

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy
Analysis of Global Markets operating income
Half Year

Movement

Mar 15$M689

Sep 14$M
573

Mar 14$M
635

Mar 15v. Sep 14
20%

Trading2

297

247

319

20%

-7%

Balance sheet3

256

280

274

-9%

-7%

1,242

1,100

1,228

13%

1%

Composition of Global Markets
operating income by business activity
Sales1

Global Markets operating income
1.
2.
3.

Mar 15v. Mar 14
9%

Sales represents direct client flow business on core products such as fixed income, FX, commodities and capital markets.
Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow.
Balance sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio.

Half Year

Movement

Composition of Global Markets
operating income by geography
Australia

Mar 15$M
461

Sep 14$M
470

Mar 14$M
477

Mar 15v. Sep 14-2%

Asia Pacific, Europe & America

612

490

602

25%

2%

New Zealand

169

140

149

21%

13%

1,242

1,100

1,228

13%

1%

Global Markets operating income

Global Markets delivered a solid result with operating income up 13%
compared to the September 2014 half, and in a tougher market
environment up only 1% from the March 2014 half.

Mar 15v. Mar 14-3%

March 2015 v March 2014

In tougher market conditions Global Markets income was up 1%:

The current half has been characterised by increased volatility, driven
by a strengthening USD, falling commodity prices and uncertainty inrates markets as to the timing of US rate increases. Generally theuncertainty in global financial markets has been beneficial for customer
flow, however this has made the trading environment challenging.
Asia continues to be the growth engine of the result and now accounts
for 33% of Global Markets operating income. The result demonstrates
a business of diversified revenue streams, with growth across thecustomer franchise compared to both September and March 2014.
Foreign Exchange, Rates and Commodities businesses have madesignificant contributions to the strength of the result and offset softer
results across Balance Sheet and Credit businesses which have faced
widening credit spreads impacting their physical bond holdings.

•

Sales income increased by 9%, driven by demand for
Commodities and Rates products.

•

Foreign Exchange continued to perform strongly, with market
volatility continuing to driving customer demand. Income fell 5%
due to market conditions impacting certain product lines that had
contributed to the abnormally strong performance in the March2014 half.

•Commodities income increased 64% off the back of continuing
demand for gold from Asian clients and the trading desk
benefiting from falling commodity prices.

•

Rates income increased 44% due to improved client productofferings and increased customer hedging activities in the current
lower interest rate environment.

March 2015 v September 2014

Global Markets has delivered a strong result with income increasing by
13%:

62

•

Sales income increased 20% driven by increased activity withFinancial Institutions customers and higher level of corporateclient hedging activity.

•

Foreign Exchange income increased by 41% with higher global
foreign exchange market volatility driving increased customer
flow.

•

Rates income increased 82% driven by strong customer flow andfavourable trading activities.

•

Balance Sheet income decreased 9% and credit income
decreased 13% as credit spreads widened, reflecting theincreased uncertainty in global financial markets.

•

Asia income increased 34% driven by demand for gold andforeign exchange products.

SEGMENT REVIEWInternational and Institutional Banking
Andrew Géczy
Market risk
Traded market risk
Below are aggregate Value at Risk (VaR) exposures at 99% confidence level covering both physical and derivative trading positions for the Bank’s
principal trading centres. All figures are in AUD.
99% confidence level (1 day holding period)

As at
Mar 15$M

High for
periodMar 15$M

Low forperiodMar 15$M

Avg forperiodMar 15$M

As at
Sep 14$M

High foryear
Sep 14$M

Low foryear
Sep 14$M

Avg foryear
Sep 14$M

Value at Risk at 99% confidence
Foreign exchange

4.6

18.2

3.3

9.0

11.9

18.5

1.7

8.9

Interest rate

6.5

20.2

4.8

10.3

10.4

16.6

3.8

8.1

Credit

3.3

4.9

2.9

3.9

5.8

5.8

2.7

3.8

Commodities

2.2

3.5

1.3

2.3

2.0

2.8

0.9

1.4

Equity

0.6

6.3

0.4

1.3

1.3

2.5

0.4

1.0

Diversification benefit

(8.5)

n/a

n/a

(17.0)(18.6)

n/an/a(10.5)

8.7

15.0

6.9

9.8

12.8

22.9

5.5

12.7

Total VaR

Non-traded interest rate risk
Non-traded interest rate risk is managed by Global Markets and relates to the potential adverse impact of changes in market interest rates on future netinterest income for the Group. Interest rate risk is reported using various techniques including VaR and scenario analysis to a 1% rate shock.
99% confidence level (1 day holding period)

As at
Mar 15$M

High for
periodMar 15$M

Low forperiodMar 15$M

Avg forperiodMar 15$M

As at
Sep 14$M

High foryear
Sep 14$M

Low foryear
Sep 14$M

Avg foryear
Sep 14$M

Australia

23.0

38.5

23.0

30.3

41.8

64.5

39.1

50.1

New Zealand

11.4

11.4

8.9

10.1

8.9

11.4

8.9

10.4

Asia Pacific, Europe & America

9.6

10.1

7.9

9.2

9.1

10.6

8.9

9.8

(12.6)

n/an/a(15.2)(13.4)

n/an/a(13.7)

31.4

37.4

31.4

34.4

46.4

76.3

43.3

56.6

Value at Risk at 99% confidence

Diversification benefit
Total VaR

Impact of 1% rate shock on the next 12 months’ net interest income1
As at
As at period end

Mar 15
1.17%

Sep 140.97%

Maximum exposure

1.39%

1.48%

Minimum exposure

0.83%

0.74%

Average exposure (in absolute terms)

1.11%

1.12%

1.

The impact is expressed as a percentage of net interest income. A positive result indicates that a rate increase is positive for net interest income. Conversely, a negative indicates a rateincrease is negative for net interest income.

63

SE
EGMENT REVIIEW
New
w ZealandDav
vid HiscoThee New Zealand ddivision comprise
es Retail and Com
mmercial businesss units.
New
w Zealand’s resu
ults and commen
ntary are reported
d in NZD. AUD reesults are shownn on page 69.
Cas
sh profit – Marc
ch 2015 Half Yea
ar v March 2014
4 Half Yearlower wholesale funding costss, partly offset byy lending mix, witth
customers coontinuing to favouur lower margin fixed
frate produccts.

New
w Zealand divisio
on has maintaine
ed its momentum
m into 2015 with astro
ong first half perfo
formance. Buoya
ant consumer andd businessconnfidence has drivven economic acttivity and in turn lending volumess.
Witth our market lea
ading network and connections, ANZA
is wellpossitioned to levera
age this activity inn New Zealand. Our
O operatingexp
penses to operatiing income ratio continues to trennd downwards, innparrt due to our simp
plification strateg
gy and increased usage of digitaltechhnologies for botth customers andd staff. The ANZ brand in New
Zeaaland is stronger than ever1 and thet New Zealandd Division is apossitive contributor to the ANZ Grou
up’s return on ave
erage
sha
areholder’s equityy. We are growinng both sides of thet balance sheeet,
withh lending and deposits in excess of system2.

•

Other operatiing income increa
eased 1% due to higher commissiionsfrom distribution of KiwiSaverr.

•

Operating expenses increaseed 2% driven by inflationaryi
impacts
and investme
ent activity partly offset by produc
ctivity measures. The
operating exp
penses to operatting income ratio improved 120 bps
to 40.1%.

•

Credit impairment charges inccreased NZ$ 57 million from a neetrelease of NZ
Z$ 37 million in thhe first half of 2014 to a charge ofo
NZ$ 20 millio
on in the first halff of 2015. The inddividual credit
impairment charge increased 53% reflecting a slowing in the levelof write-backss particularly in tthe CommAgri po
ortfolio, partly offfset
by lower leveels of new and topp-up provisions. The release frommcollective pro
ovisions was NZ$$ 49 million lower due to portfolio
growth and th
he reduced rate oof improvement in credit quality
compared to the March 2014 half.

March 2015 v September 20114

Rettail
Durring the first half of 2015 we havee seen strong net customer growtth
withh acquisition up aand defection do
own and we’re deelivering more
revenue per FTE an
nd per branch. We
W continue to deeliver new digitalo mobile banking application
functionality for our customers and our(goMoneyTM) has coonsistently ranke
ed first or secondd for customer
satiisfaction over thee half3. Our focuss on having the bestbpeople in theerighht locations havinng relevant conve
ersations with cu
ustomers is payinng
dividends, with stronng growth in the key Auckland an
nd Christchurchmarkets and the Mig
grant customer segment.
s

ash profit increas
sed 5%, driven by strong deposit and lending grow
wth.
Ca
Ke
ey factors affectinng the result werre:Com
mmercialWee have ensured th
hat our frontline staffshave more timetto spend witth
Com
mmercial custom
mers by streamlin
ning and improvinng ouradm
ministrative proceesses. Staff num
mbers in regional branches haveincrreased around th
he country, reinfo
orcing our commitment to New
Zeaaland’s local com
mmunities. Our fo
ocus on simplifica
ation continues,
andd projects to alignn staff and customer needs and enhance
e
the
cus
stomer experiencce have deliveredd benefits. Thesee included faster
credit assessments, simpler facility documentsdand enhancedeonlineefunctionality.
March 2015 v M
March 2014

Cas
sh profit increase
ed 1%. Profit beffore credit impairment and incomee
tax increased 8% reeflecting good ne
et interest income
e growth.

•

Net interest inncome increasedd 3%, due to stro
ong lending growwth
and margin management.
m
Neet interest marginn increased 3 bpss
due to lower wholesale fundinng costs, partly offsetoby lending mix,
ers continuing to ffavour lower margin fixed ratewith custome
products.

•

Other operatiing income increa
eased 5% driven primarily by Retaail.
Growth was drivendby credit ccard earnings refflecting seasonall
customer beh
haviour and higheer commissions from distribution of
KiwiSaver and insurance prodducts.

•

Operating expenses increaseed 2% driven by inflationaryiandinvestment im
mpacts, partly offfset by productivity measures.

•

Credit impairment charges deecreased NZ$ 8 million. The
individual cre
edit impairment ccharge decreased
d 57%, reflectinggaslowing in thee level of new proovisions, partly offsetoby lower wrritebacks. The reelease from colleective provisions was NZ$ 23 milllion
lower due to a lower release oof economic overlay provisions andathe impact of lending growth.

Keyy factors affecting
g the result weree:•

Net interest income increased 6%, primarily duue to above systeem
growth in lending. Average gro
oss loans and advances grew 5%%,
with good grow
wth across both thet housing and non-housing
portfolios. Net interest margin increased 3 bps despite intense
lending compe
etition. Net intere
est margin growthh was driven by

1
2
3

64

Source: McCulley Research Limited (fifirst choice or serious
sly considered) Feb 2015.
2
Source: RBNZ Feb 2015.
Source: Camorra (rolling 6 month averrage).

SEGMENT REVIEWNew ZealandDavid Hisco
Table reflects NZD for New Zealand
AUD results shown on page 69
Half YearNet interest income
Other operating income

Movement

Mar 15
NZD M
1,241

Sep 14
NZD M
1,206

Mar 14
NZD M
1,166

Mar 15v. Sep 14
3%

Mar 15v. Mar 14
6%

196

187

195

5%

1%

Operating income

1,437

1,393

1,361

3%

6%

Operating expenses

(576)

(565)

(562)

2%

2%

Profit before credit impairment and income tax

861

828

799

4%

8%

Credit impairment (charge)/release

(20)

(28)

37

-29%

large

Profit before income tax

841

800

836

5%

1%

Income tax expense and non-controlling interests

(236)

(224)

(235)

5%

0%

Cash profit

605

576

601

5%

1%

Consisting of:Retail

238

222

229

7%

4%

Commercial

368

349

374

5%

-2%

Other

(1)

5

(2)

large

-50%

Cash profit

605

576

601

5%

1%

Balance Sheet
Net loans & advances

99,51896,555

94,140

3%

6%

Other external assets

3,699

3,791

4,015

-2%

-8%

External assets

103,217

100,346

98,155

3%

5%

Customer deposits

61,42757,621

55,205

7%

11%

Other deposits and borrowings

6,273

6,057

5,401

4%

16%

Deposits and other borrowings

67,70063,67860,606

6%

12%

Other external liabilities

19,74818,313

15,9728%

24%

External liabilities

87,44881,991

76,578

7%

14%

Risk weighted assets

55,00654,62053,756

1%

2%

Average gross loans and advances

98,262

96,03093,583

2%

5%

Average deposits and other borrowings

66,62262,35059,743

7%

12%

RatiosReturn on assets

1.20%

1.16%

1.24%

Net interest margin

2.52%

2.49%

2.49%

Operating expenses to operating income

40.1%

40.6%

41.3%

Operating expenses to average assets

1.14%

1.13%

1.16%
-57%

53%

-88%

-94%

-26%

-38%

1%

-2%

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)

23

54

15

0.05%

0.11%

0.03%

(3)

(26)

(52)

(0.01%)(0.05%)(0.11%)

443

597

714

Gross impaired assets as a % of GLA

0.44%

0.61%

0.75%

Total full time equivalent staff (FTE)

5,090

5,059

5,215

Collective credit impairment charge/(release) as a % of average GLA
Gross impaired assets

65

SEGMENT REVIEWNew ZealandDavid Hisco
Movement

Half Year

Individual credit impairment charge/(release)
Mar 15
NZD M
20

Sep 14NZD M
31Mar 14NZD M
28Mar 15v. Sep 14-35%

Mar 15v. Mar 14-29%

Commercial

3

23

(13)

-87%

large

CommAgri

(2)

7

(25)

large

-92%

Small Business Banking

5

16

12

-69%

-58%

23

54

15

-57%

53%

RetailIndividual credit impairment charge/(release)

Half Year

Collective credit impairment charge/(release)
Mar 15NZD M(2)Retail

Sep 14NZD M(12)Movement
Mar 14NZD M(16)Mar 15v. Sep 14-83%

Mar 15v. Mar 14-88%

Commercial

(1)

(14)

(36)

-93%

-97%

CommAgri

-

(21)

(33)

-100%

-100%

Small Business Banking

(1)

7

(3)

large

-67%

Collective credit impairment charge/(release)

(3)

(26)

(52)

-88%

-94%

Total credit impairment charge/(release)

20

28

(37)

-29%

large

As at

Net loans and advances

Movement

RetailMar 15
NZD M
37,373

Sep 14
NZD M
37,123

Mar 14
NZD M
36,875

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
1%

Commercial

62,14559,43257,265

5%

9%

CommAgri37,601

36,55635,429

3%

6%

Small Business Banking

24,54422,876

21,8367%

12%

Net loans and advances

99,51896,555

94,140

3%

6%

As at

Customer deposits

Movement

RetailMar 15
NZD M
36,590

Sep 14
NZD M
34,695

Mar 14
NZD M
32,656

Mar 15v. Sep 14
5%

Mar 15v. Mar 14
12%

Commercial

24,83722,92622,549

8%

10%

CommAgri11,593

10,82910,832

7%

7%

Small Business Banking

13,244

12,097

11,7179%

13%61,42757,621

55,205

7%

11%

Customer deposits

66

SEGMENT REVIEWNew ZealandDavid Hisco
RetailMovement

Half Year
Mar 15
NZD M
506

Sep 14
NZD M
494

Mar 14
NZD M
485

Mar 15v. Sep 142%

Mar 15v. Mar 14
4%

Other operating income

150

143

154

5%

-3%

Operating income

656

637

639

3%

3%

Operating expenses

(307)

(309)

(309)

-1%

-1%

Net interest income

Profit before credit impairment and income tax

349

328

330

6%

6%

Credit impairment charge

(18)

(19)

(12)

-5%

50%

Profit before income tax

331

309

318

7%

4%

Income tax expense and non-controlling interests

(93)

(87)

(89)

7%

4%

Cash profit

238

222

229

7%

4%

18,31919,082

19,270-4%-5%

Risk weighted assets

Individual credit impairment charge/(release)

20

31

28

-35%

-29%

Collective credit impairment charge/(release)

(2)

(12)

(16)

-83%

-88%

Net loans & advances

37,37337,12336,875

1%

1%

Customer deposits

36,59034,69532,656

5%

12%

67

SEGMENT REVIEWNew ZealandDavid Hisco
Commercial
Movement

Half Year
Mar 15
NZD M
726

Net interest income

Sep 14
NZD M
703

Mar 14
NZD M
674

Mar 15v. Sep 14
3%

Mar 15v. Mar 14
8%

Other operating income

46

44

47

5%

-2%

Operating income

772

747

721

3%

7%

Operating expenses

(259)

(253)

(250)

2%

4%

Profit before credit impairment and income tax

513

494

471

4%

9%

(2)

(9)

49

-78%

large

Credit impairment (charge)/release
Profit before income tax

511

485

520

5%

-2%

Income tax expense and non-controlling interests

(143)

(136)

(146)

5%

-2%

Cash profit

368

349

374

5%

-2%

Risk weighted assets

35,99834,85634,196

3%

5%

Individual credit impairment charge/(release)
CommAgriMar 15
NZD M(2)

Sep 14NZD M
7Mar 14
NZD M(25)

Mar 15v. Sep 14
large

Mar 15v. Mar 14
-92%

5

16

12

-69%

-58%

3

23

(13)

-87%

large

Half Year

Small Business Banking
Individual credit impairment charge/(release)Collective credit impairment charge/(release)
CommAgriMovement

-

(21)

(33)

-100%

-100%

(1)

7

(3)

large

-67%

Collective credit impairment charge/(release)

(1)

(14)

(36)

-93%

-97%

Total credit impairment charge/(release)

2

9

(49)

-78%

large

Small Business Banking

As at

Movement

Mar 15
NZD M
37,601

Sep 14
NZD M
36,556

Mar 14
NZD M
35,429Mar 15v. Sep 14
3%

Mar 15v. Mar 14
6%

24,54422,876

21,8367%

12%

62,14559,43257,265

5%

9%

CommAgri11,593

10,82910,832

7%

7%

Small Business Banking

13,244

12,097

11,7179%

13%

24,83722,92622,5498%

10%Net loans & advances
CommAgri
Small Business Banking
Net loans & advances

Customer deposits

Customer deposits

68

SEGMENT REVIEWNew ZealandDavid Hisco
Table reflects AUD for New Zealand
NZD results shown on page 65
Half YearNet interest income
Other operating income

Movement

Mar 15$M
1,161

Sep 14$M
1,106

Mar 14$M
1,065

Mar 15v. Sep 14
5%

Mar 15v. Mar 14
9%

183

171

178

7%

3%
8%

Operating income

1,344

1,277

1,243

5%

Operating expenses

(539)

(518)

(513)

4%

5%

Profit before credit impairment and income tax

805

759

730

6%

10%

Credit impairment (charge)/release

(19)

(26)

34

-27%

large

Profit before income tax

786

733

764

7%

3%

Income tax expense and non-controlling interests

(220)

(205)

(214)

7%

3%

Cash profit

566

528

550

7%

3%

Consisting of:Retail

223

205

209

9%

7%

Commercial

344

320

343

8%

0%

Other

(1)

3

(2)

large

-50%

Cash profit

566

528

550

7%

3%

Balance Sheet
Net loans & advances

97,67986,06388,247

13%

11%

Other external assets

3,631

3,380

3,763

7%

-4%

External assets

101,31089,44392,010

13%

10%

Customer deposits

60,29351,36051,74917%

17%

Other deposits and borrowings

6,157

5,399

5,063

14%

22%

Deposits and other borrowings

66,45056,75956,81217%

17%

Other external liabilities

19,383

16,323

14,97219%

29%

External liabilities

85,83373,082

71,78417%

20%

Risk weighted assets

53,99048,68250,391

11%

7%

Average gross loans and advances

91,90888,071

85,396

4%

8%

Average deposits and other borrowings

62,31457,18054,5169%

14%

RatiosReturn on assets

1.20%

1.16%

1.24%

Net interest margin

2.52%

2.49%

2.49%

Operating expenses to operating income

40.1%

40.6%

41.3%

Operating expenses to average assets

1.14%

1.13%

1.16%
-56%

69%

-88%

-94%

-18%

-35%

1%

-2%

Individual credit impairment charge/(release)
Individual credit impairment charge/(release) as a % of average GLA
Collective credit impairment charge/(release)

22

50

13

0.05%

0.11%

0.03%

(3)

(24)

(47)

(0.01%)(0.05%)(0.11%)

434

532

668

Gross impaired assets as a % of GLA

0.44%

0.61%

0.75%

Total full time equivalent staff (FTE)

5,090

5,059

5,215

Collective credit impairment charge/(release) as a % of average GLA
Gross impaired assets

69

SE
EGMENT REVIIEW
Gloobal WealthJoyyce Phillips
Thee Global Wealth division comprisees Funds Manag
gement, Insurancce and Private WealthWbusiness unitsuwhich providde solutions to customers acrosss the
Asia-Pacific region.
Cas
sh profit – Marc
ch 2015 Half Yea
ar v March 2014
4 Half YearGloobal Wealth proviides a range of innnovative solutio
ons to customerssacross the Asia Paccific region to ma
ake it easier for th
hem to connect
withh, protect and groow their wealth. Global Wealth seerves over 2.4
million customers and manages $68
8 billion in investm
ment andretirement savings. Customers can access ANZ’s weealth solutions
throough teams of highly qualified financial planners anda advisers,inno
ovative digital pla
atforms, ANZ Priivate Bankers, ANZ branches andd
dire
ect channels.

•Funds Manage
ement operating income increase
ed by 4%, driven bysolid growth inn average Funds Under Managem
ment (FUM) as aresult of strong
g performance inn investment marrkets.

ANZ
Z’s customers arre increasingly loooking for simple, affordable andmore convenient wa
ays to manage thheir wealth. In response to this,obal Wealth deve
eloped Grow - a seriessof innovatiions across theGlophyysical, digital andd advice space too help our custom
mers better conneect
withh, protect and groow their wealth. These innovation
ns include ANZ
Smmart Choice Supeer, a simple directt retirement savin
ngs solution, theeANZ
Z Grow Centre, a destination tha
at blends digital toools with physicaal
weaalth specialists, w
where customerss can get help witth everything fro mtheir digital device to financial advicee, and Grow by ANZ
A TM, our awarrd
winning digital app tthat brings bankiing, share investments,
supperannuation andd insurance, toge
ether in the one place.
p•

Insurance ope
erating income inccreased by 23% as a result of a oneoff $47 million experience losss due to the exit ofo a Group Lifen in the March 20014 half. Excluding this, income grewgInsurance plan
by 5% driven byb in-force premiium growth and improvedi
lapse
experience.

•

The performan
nce of the abovee businesses contributed to a 22%%
uplift in the Em
mbedded Value (g(gross of transferrs) over the year..

•

Corporate andd Other income ddecreased by 23%% driven by a no
onrecurring insurrance settlementt in New Zealandd in March 2014 half.
h•Excluding $16 million of ANZ T
Trustees related income in the Ma
arch2014 half, Priv
vate Wealth operrating income inccreased by 17%
driven by grow
wth in customer ddeposits and inve
estment FUM.

•

Operating expenses were relattively flat at 1%.

March 2015 v September 20114

March 2015 v March 2014Ca
ash profit increas
sed by 11%, withh 5% increase in operating incomean
nd 1% increase inn expenses.
Ke
ey factors affectinng the result werre:

Funnds ManagemenntThee Funds Manage
ement business helpshcustomers grow their wealthh
throough investment,, superannuationn and pension soolutions. GlobalWeealth has embracced the changing regulatory environment to reshaapethe business, simpliifying operationa
al processes and deliveringinno
ovative solutionss like ANZ Smart Choice Super and Grow by ANZ
ZTM.

Caash profit decreased by 16%. Exccluding the $64 millionm
net impacct ofthee ANZ Trustees sale and subseqquent investmentt in productivity
initiatives in the Se
eptember 2014 hhalf, cash profit inncreased by 6%.

Insurance
Thee Insurance busin
ness provides prrotection for all liffe stages throughh acom
mprehensive rang
ge of life and gen
neral insurance productsp
distributtedthroough intermediatted and direct channels. Global Wealth’s
Wfocus onnreta
ail risk resulted in
n 10% growth in individual in-forc
ce premiums, wh ile
conntinued investment in retention initiatives in Austra
alia reduced retaaillaps
se rates by 50 bp
ps.

Ke
ey factors affectinng the result werre:•Funds Manage
ement operating income increase
ed by 6% primariily
due to growth in average FUM
M driven by marke
et performance andastable netflowss.

•

Insurance ope
erating income inccreased by 8% reflectingrsolid inforce premiumm growth and impproved claims exp
perience.

•

The performan
nce of the abovee businesses contributed to a 13%%
uplift in the Em
mbedded Value (g(gross of transferrs) over the periood.

•Excluding the gain on sale of A
ANZ Trustees annd related income
e in
September 2014 half, Private W
Wealth operatingg income increassed
9% with strong
g growth in custoomer deposits an
nd investment FU
UM.

•

Operating expenses decreasedd by 6%. Excluding the net impacct of
the sale of ANZ Trustees and tthe write-down ofo intangibles,
expenses incre
eased by 3% in lline with busines
ss growth.

Privvate WealthOpeerating in six geo
ographies acrosss the region we continue
c
to
stre
engthen our Priva
ate Wealth offerings by building corecinvestment
adv
vice capabilities aand developing a suite of global investment
solu
utions. This inclu
udes leveraging thet expertise of strategicspartnersssuc
ch as Swiss Priva
ate Bank Vontobel.

70

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Half Year
Mar 15$M
88

Net interest income

Sep 14$M
88

Movement
Mar 14$M
80

Mar 15v. Sep 14
0%

Mar 15v. Mar 14
10%

Other operating income1

97

208

120

-53%

-19%

Net funds management and insurance income

665

642

607

4%

10%

Operating income

850

938

807

-9%

5%

Operating expenses

(489)

(520)

(484)

-6%

1%

Profit before credit impairment and income tax

361

418

323

-14%

12%

1

1

1

0%

0%
12%

Credit impairment (charge)/release
Profit before income tax

362

419

324

-14%

Income tax expense and non-controlling interests

(103)

(111)

(90)

-7%

14%

Cash profit

259

308

234

-16%

11%

Consisting of:Business Segments
Funds Management2

78

55

65

42%

20%

Insurance

143

126

98

13%

46%

1

Private Wealth

43

137

44

-69%

-2%

Corporate and Other3

(5)

(10)

27

-50%

large

Total Global Wealth

259

308

234

-16%

11%

Australia

199

248

161

-20%

24%

New Zealand4

62

56

71

11%

-13%

(2)

4

2

large

large

Total Global WealthAsia Pacific, Europe & America

259

308

234

-16%

11%

Income from invested capital5

55

55

53

0%

4%

Funds under management

68,40561,411

61,65211%

11%

Average funds under management

64,615

62,10660,552

4%

7%

In-force premiums

2,154

2,038

1,955

6%

10%

Key metrics

Net loans and advances

6,163

5,678

6,012

9%

3%

Customer deposits

17,357

13,844

12,69925%

37%

Average gross loans and advances

5,725

5,726

6,146

0%

-7%

Average customer deposits

15,63913,104

12,27819%

27%

RatiosOperating expenses to operating income

57.5%

55.4%

60.0%

Australia

0.51%

0.60%

0.58%

New Zealand

0.31%

0.36%

0.41%

Australia

10.4%

11.0%

11.9%

New Zealand

32.1%

35.8%

34.6%

Australia

11.6%

12.5%

12.1%

New Zealand

14.3%

16.7%

14.9%

Total full time equivalent staff (FTE)

2,538

2,290

2,284

11%

11%

Aligned adviser numbers7

1,823

2,022

2,061

-10%

-12%

Funds Management expenses to average FUM6

Insurance expenses to in-force premiums

Retail Insurance lapse rates

1.
2.
3.
4.

5.

6.
7.

Other operating income within Private Wealth for the September 2014 half includes a $125 million gain on the sale of ANZ Trustees.
Funds Management includes the Pensions & Investments business and E*TRADE.
Corporate and Other includes profits from the Advice and Distribution business.
Includes a $26 million cross border settlement of an insurance claim in March 2014 involving both Australia and New Zealand on a net basis. For statutory purposes, the individualcomponents of this settlement have been recognised in their respective geographies.
Income from invested capital represents after tax revenue generated from investing all Insurance and Funds Management business' capital balances held for regulatory purposes(previously reported net of funding charges and for ANZ Wealth Australia Ltd group of companies only). The invested capital as at 31 March 2015 was $3.6 billion (Sep 14: $3.3 billion;
Mar 14: $3.0 billion), which comprised of fixed interest securities of 49% and cash deposits of 51% (Sep 14: 49% fixed interest securities and 51% cash deposits; Mar 14: 41% fixedinterest securities and 59% cash deposits).
Funds Management expense and FUM only relates to the Pensions & Investments business.
Includes corporate authorised representatives of dealer groups wholly or partially owned by ANZ Wealth and ANZ Group financial planners. Prior period aligned adviser numbers included
authorised representatives of a dealer group no longer owned by ANZ Wealth (Sep 14: 211; Mar 14: 231).

71

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Major business segments
Movement

Half Year
Mar 15$M
15

Funds Management1
Net interest income

Sep 14$M
16

Mar 14$M
17

Mar 15v. Sep 14-6%

Mar 15v. Mar 14-12%

Other operating income

37

34

33

9%

12%

Funds management income

431

419

416

3%

4%

Funds management volume related expenses

(199)

(202)

(194)

-1%

3%

Operating income

284

267

272

6%

4%

Operating expenses

(173)

(191)

(180)

-9%

-4%

Profit before income tax

111

76

92

46%

21%

Income tax expense and non-controlling interests

(33)

(21)

(27)

57%

22%

Cash profit

78

55

65

42%

20%

Half Year
Mar 15$M
17

Insurance
Net interest income

Sep 14$M
15

Movement
Mar 14$M
14

Mar 15v. Sep 14
13%

Mar 15v. Mar 14
21%

Other operating income

32

24

33

33%

-3%

Insurance income

437

405

358

8%

22%

Insurance volume related expenses

(154)

(137)

(135)

12%

14%

Operating income

332

307

270

8%

23%

Operating expenses

(134)

(134)

(136)

0%

-1%

Profit before income tax

198

173

134

14%

48%

Income tax expense and non-controlling interests

(55)

(47)

(36)

17%

53%

Cash profit

143

126

98

13%

46%

Half Year

Movement

Mar 15$M
79

Sep 14$M
75

Mar 14$M
67

Mar 15v. Sep 14
5%

Mar 15v. Mar 14
18%

Other operating income2

20

147

30

-86%

-33%

Net funds management income

25

22

25

14%

0%
2%

Private Wealth
Net interest income

Operating income

124

244

122

-49%

Operating expenses

(64)

(57)

(62)

12%

3%

Profit before credit impairment and income tax

60

187

60

-68%

0%

Credit impairment charge

1

1

1

0%

0%

Profit before income tax

61

188

61

-68%

0%

Income tax expense and non-controlling interests

(18)

(51)

(17)

-65%

6%

Cash profit

43

137

44

-69%

-2%

1.
2.

Funds Management includes the Pensions & Investments business and E*TRADE.
Other operating income for the September 2014 half include a $125 million gain on the sale of ANZ Trustees.

72

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Half Year
Mar 15$M

Insurance operating margin
Life Insurance Planned profit margin

Sep 14$M

Movement
Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Group & Individual

65

64

52

2%

25%

Experience profit/(loss)1

4

(11)

(25)

large

large

Assumption changes2

-

-

-

n/a

n/a

General Insurance operating profit margin3

47

47

45

0%

4%

Australia

116

100

72

16%

61%

24

21

21

14%

14%

3

5

5

-40%

-40%

Life Insurance Planned profit margin
Individual
Experience profit/(loss)1
Assumption changes2

-

-

-

n/a

n/a

New Zealand

27

26

26

4%

4%

Total

143

126

98

13%

46%

1.
2.
3.

Experience profit/(loss) variations are gains or losses arising from actual experience differing from plan.
Assumption changes are gains or losses arising from a change in valuation methods and best estimate assumptions.
General Insurance operating profit margin includes ANZ Lenders Mortgage Insurance.

Half Year
Operating expenses by business segment
Funds Management4

Movement

Mar 15$M
173

Sep 14$M191

Mar 14$M
180

Mar 15v. Sep 14-9%

Mar 15v. Mar 14-4%-1%

Insurance

134

134

136

0%

Private Wealth

64

57

62

12%

3%

Corporate and Other

118

138

106

-14%

11%

Total

489

520

484

-6%

1%

Mar 15v. Sep 14-9%4.

Funds Management includes the Pensions & Investments business and E*TRADE.

Half Year

Movement

Mar 15$M392

Sep 14$M
431

Mar 14$M
396

New Zealand

65

64

61

2%

7%

Asia Pacific, Europe & America

32

25

27

28%

19%

Total

489

520

484

-6%

1%

Operating expenses by geography segment
Australia

As at

Mar 15v. Mar 14-1%

Movement

Funds under management
Funds under management - average

Mar 15$M
64,615

Sep 14$M
62,106

Mar 14$M
60,552

Mar 15v. Sep 14
4%

Mar 15v. Mar 14
7%

Funds under management - end of period

68,40561,411

61,65211%

11%

Composed of:Australian equities

18,04016,744

19,947

8%-10%International equities

18,533

16,164

13,46815%

38%

Cash and fixed interest

27,58324,937

24,35011%

13%

Property and infrastructure

4,249

3,566

3,887

19%

9%

Total

68,40561,411

61,652

11%

11%

As at

Movement

Funds under management by region
Australia

Mar 15$M
51,369Sep 14$M
47,502

Mar 14$M
48,746

Mar 15v. Sep 14
8%

Mar 15v. Mar 14
5%

New Zealand

17,036

13,90912,906

22%

32%

Total

68,40561,411

61,652

11%

11%

73

SEGMENT REVIEW
Global Wealth
Joyce Phillips
Inflows

Outflows

Other1

Funds Management cash flows by productMar 15$M

Sep 14$M
19,501

OneAnswer

21,041

1,265(1,242)

1,517

Other Personal Investment

6,183

500

(392)

307

5,768

Employer Super

15,321

1,064(1,362)

1,053

14,566

Oasis

6,914

465

(464)

547

6,366

Private Wealth - Australia

1,910

484

(117)

242

1,301

KiwiSaver

6,745

761

(203)

1,025

5,162

Private Wealth - New Zealand

5,174

282

(205)

632

4,465

Other New Zealand

5,117

1,082

(1,035)

788

4,282

Total

68,405

5,903(5,020)6,111

61,411

1.

Other includes investment income net of taxes, fees and charges, distributions and the impact of foreign currency translation.

As at

Movement

Insurance annual in-force premiumsGroup

Mar 15$M390

Sep 14$M
360

Mar 14$M
336

Mar 15v. Sep 14
8%

Mar 15v. Mar 14
16%

Individual

1,246

1,178

1,132

6%

10%

2

518

500

487

4%

6%

Total

2,154

2,038

1,955

6%

10%

Insurance annual in-force premiums by region
Australia

1,955

1,865

1,780

5%

10%

General Insurance

New Zealand

199

173

175

15%

14%

2,154

2,038

1,955

6%

10%

Insurance in-force book movement
Group

Mar 15$M
390

New
business$M3
39

Lapses$M(9)

Sep 14$M
360

Individual

1,246

134

(66)

1,178

518

87

(69)

500

Total

2,154

260

(144)

2,038

Insurance in-force book movement by region
Australia

1,955

227

(137)

1,865

199

33

(7)

173

2,154

260

(144)

2,038

Total

General Insurance2

New Zealand
Total
2.
3

General Insurance in-force premiums include ANZ Lenders Mortgage Insurance.
New business includes the impact of foreign currency translation.

Embedded value and value of new business (insurance and investments only)
Embedded value as at September 20144

87

11

98

152

22

174

Experience deviations and assumption changes7

95

-

95

3,713

537

4,250

63

81

144

(176)

-

(176)

3,600

618

4,218

Net transfer9
Embedded value as at March 2015

6.
7.

8.

9.

Total
$M
3,883

Expected return6

Economic assumptions change8

5.

New Zealand$M
504

Value of new business5

Embedded value before economic assumption changes and net transfer

4.

Australia$M
3,379

Embedded value represents the present value of future profits and releases of capital arising from the business in force at the valuation date and adjusted net assets. It is determinedusing best estimate assumptions with franking credits included at 70% of face value. Projected cash flows have been discounted using capital asset pricing model risk discount rates of
7.25%-9.0%. ANZ Lenders Mortgage Insurance is not included in the valuation.
Value of new business represents the present value of future profits less the cost of capital arising from new business written over the period.
Expected return represents the expected increase in value over the period.
Experience deviations and assumption changes arise from deviations from and changes to best estimate assumptions underlying the prior period embedded value. The favourable
movement for the Australian business is primarily driven by improved capital efficiency, positive investment markets and better claims and lapse experience from the Insurance business.
Growth for the New Zealand business was in line with expectations.
Lower interest rates have led to a positive value impact for both the Australia and New Zealand businesses. Higher exchange rates for New Zealand have further improved the value inAustralian dollars.
Net transfer represents the net capital movements over the period including capital injections, cash dividends and the value of franking credits. There was a $100 million cash dividend anda $76 million franking credit transferred to the parent entity.

74

SE
EGMENT REVIIEW
Gloobal Technolog
gy, Services an
nd Operations and Group Ce ntre
GTSO and Group C
Centre provide su
upport to the ope
erating divisions, including techno
ology, operations, shared servicess, property, risk management,
fina
ancial manageme
ent, strategy, ma
arketing, human resourcesrand coorporate affairs. The
T Group Centrre also includes GGroup Treasury and Shareholder
Funnctions.
Half Year

Movement

Mar 15$M
192

Sep 14$M191

Mar 14$M
181

Oth
her operating incom
me1

(228)

(171)

(186)

33%

23
3%

Ope
erating income

(36)

20

(5)

large

larrgeOpeerating expenses

(238)

(245)

(183)

-3%

30
0%

Profit before credit im
mpairment and inccome tax

(274)

(225)

(188)

22%

46
6%

1

34

1

-97%

0
0%

(273)

(191)

(187)

43%

46
6%

63

51

67

24%

-6
6%

Nett interest income1

Cre
edit impairment (chharge)/release
Profit before income tax
Inco
ome tax expense and non-controllin
ng interestsCas
sh profit/(loss)Tota
al full time equivalent staff (FTE)1.

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
6
6%

(210)

(140)

(120)

50%

75
5%

25,227

24,96624,2991%

4
4%Includes offsetting vvariances between ne
et interest and other income as a result oof elimination entries associated with the consolidationcof Globbal Wealth.

Cassh Profit – Marc
ch 2015 Half Yea
ar v March 2014
4 Half YearGTSO has deliveredd a strong perforrmance with succ
cessful progress on
productivity initiativees, whilst delivering a more consiistent, higher
ality experience ffor the operating divisions.
qua•

Operating expenses increaseed $55 million due to increased
investment in
n enterprise projeects, higher depreciation andamortisation and investment iin the Global Compliance function.

Ourr investment in ccommon platform
ms and the develo
opment of ourregional delivery ne
etwork is helping us drive transforrmation of keybussiness activities, improving custom
mer experience anda driving downn
cos
st to serve.

•

The increase in FTEs is primaarily due to grow
wth in the Group
Hubs, increas
sed resources foor enterprise projects and the builldout of the Glo
obal Compliancee function.

Wee are processing record volumes of work with stanndardised and reeeng
gineered global p
processes while demonstratingdincreasing quality
imp
provements year--on-year.

March 2015 v September 20114

Ke
ey factors affectinng the result werre:

Ourr operations costts have declined compared to Maarch 2014, whilstt
abssorbing an increa
ase in transactionn volumes, resultting in operationss
productivity improve
ement of 10%.
The
e consumer and wholesale channnels are handlingg greater peak daaily
tran
nsaction volumess through increassed automation anda digitisation.
March 2015 v M
March 2014•

Operating inc
come decreased $56 million primmarily due to RBA
ACommitted Liquidity Facility feees that commen
nced in the Marcch
2015 half andd increased realissed revenue hed
dge losses.

•

Operating expenses decreaseed $7 million primmarily due to low
werrestructuring costs, partly offsset by increased investment inenterprise proojects and higheer depreciation an
nd amortisation.

•

Credit impairment charges inccreased $33 million due to therelease of an economic cyclee provision held in
n Group Centre in
the Septembe
er 2014 half.

•

The increase in FTEs is largeely due to growth in the Group Hu
ubs,
increased res
sources for enterrprise projects an
nd build out of theeGlobal Comp
pliance function.

y factors affecting
g the result were
e:
Key
•

Operating inco
ome decreased $31$ million prima
arily due to RBA
Committed Liq
quidity Facility fee
es that commenc
ced in the Marchh2015 half and increased realised revenue hedg
ge losses.

75

SEGMENT REVIEWThis page has been left blank intentionally76

GEOGRAPHIC REVIEWCONTENTS

Section 6 – Geographic Review
Geographic performance
Australia geography
Asia Pacific, Europe & America geography
New Zealand geography

77

GEOGRAPHIC REVIEW
Geographic Performance
The Group's divisions operate across multiple geographies with components of the following divisional results reflected in each geography.
Australia - made up of the Australia Division and the Australian operations of International and Institutional Banking (IIB); Global Wealth and GTSO
and Group Centre divisions;

Asia, Pacific, Europe & America - made up of the APEA components of IIB, Global Wealth and GTSO and Group Centre divisions; and

New Zealand - made up of the New Zealand Division and the New Zealand components of IIB, Global Wealth and GTSO and Group Centre
divisions.

Movement

Half Year
Mar 15$M
1,964

Sep 14$M
2,561

Mar 14$M
1,931

Mar 15v. Sep 14-23%

Mar 15v. Mar 14
2%

Asia Pacific, Europe & America

722

531

683

36%

6%

New Zealand

820

787

778

4%

5%

3,506

3,879

3,392

-10%

3%

Statutory Profit
Australia

Half Year

Movement

Mar 15$M
2,147

Sep 14$M
2,337

Mar 14$M
2,025

Mar 15v. Sep 14-8%

Asia Pacific, Europe & America

743

535

681

39%

9%

New Zealand

786

730

809

8%

-3%

3,676

3,602

3,515

2%

5%

Cash Profit
Australia

Half Year

Mar 15v. Mar 14
6%

Movement

Mar 15$M
362,830

Sep 14$M
348,537

Mar 14$M
336,466

Mar 15v. Sep 14
4%

Mar 15v. Mar 14
8%

Asia Pacific, Europe & America

88,356

79,192

76,634

12%

15%

New Zealand

107,017

94,02396,15014%

11%558,203521,752

509,2507%

10%Net loans & advances
Australia

Movement

Half Year
Customer deposits
Australia

Mar 15$M
227,560

Sep 14$M
227,823

Mar 14$M
216,127

Mar 15v. Sep 14
0%

Mar 15v. Mar 14
5%

Asia Pacific, Europe & America

129,733

107,838

102,463

20%

27%

New Zealand

78

78,85468,05869,43216%

14%436,147

403,719

388,0228%

12%

GEOGRAPHIC REVIEW
Australia geography

Movement

Half YearNet interest income

Mar 15$M
4,881

Sep 14$M
4,889

Mar 14$M
4,659

Mar 15v. Sep 14
0%

Mar 15v. Mar 14
5%

Other operating income

1,445

1,553

1,381

-7%

5%

Operating income

6,326

6,442

6,040

-2%

5%

Operating expenses(2,782)(2,750)(2,648)1%

5%Profit before credit impairment and income tax

3,544

3,692

3,392

-4%

4%

Credit impairment charge

(428)

(379)

(479)

13%

-11%

Profit before income tax

3,116

3,313

2,913

-6%

7%

Income tax expense and non-controlling interests

(969)

(976)

(888)

-1%

9%

Cash profit

2,147

2,337

2,025

-8%

6%

Adjustments between statutory profit and cash profit

(183)

224

(94)

large

95%

Statutory profit

1,964

2,561

1,931

-23%

2%

Balance Sheet
Net loans & advances

362,830

348,537

336,466

4%

8%

Other external assets

174,729

153,020

136,579

14%

28%
14%

External assets

537,559

501,557

473,045

7%

Customer deposits

227,560

227,823

216,127

0%

5%

Other deposits and borrowings

87,66971,34273,90823%

19%

Deposits and other borrowings

315,229299,165

290,035

5%

9%Other external liabilities

179,421

161,809147,174

11%

22%

External liabilities

494,650

460,974

437,209

7%

13%

Risk weighted assets

209,981203,235

201,720

3%

4%

Average gross loans and advances

358,774352,275

332,847

2%

8%

Average deposits and other borrowings

318,382

302,884

290,9125%

9%

Ratios
Net interest margin - cash

2.28%

2.39%

2.38%

Operating expenses to operating income - cash

44.0%

42.7%

43.8%

Operating expenses to average assets - cash

1.06%

1.13%

1.14%
-14%

-18%

large

large

-8%

-31%

2%

1%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash

375

437

455

0.21%

0.25%

0.27%

53

(58)

24

Collective credit impairment charge/(release) as a % of average GLA - cash

0.03%

(0.03%)

0.01%

Gross impaired assets

1,589

1,730

2,288

Gross impaired assets as a % of GLA

0.43%

0.49%

0.67%

Total full time equivalent staff (FTE)

22,096

21,591

21,821

79

GEOGRAPHIC REVIEWAsia Pacific, Europe & America geography
Table reflects AUD for the APEA region

Movement

Half YearNet interest income

Mar 15$M
926

Other operating income

1,127

899

1,036

25%

Operating income

2,053

1,763

1,891

16%

9%

Operating expenses(1,120)(1,046)

(977)

7%

15%

Profit before credit impairment and income tax

933

717

914

30%

2%

Credit impairment charge

(53)

(54)

(85)

-2%

-38%

Sep 14$M864

Mar 14$M855

Mar 15v. Sep 14
7%

Mar 15v. Mar 14
8%
9%Profit before income tax

880

663

829

33%

6%

Income tax expense and non-controlling interests

(137)

(128)

(148)

7%

-7%

Cash profit1

743

535

681

39%

9%

Adjustments between statutory profit and cash profit

(21)

(4)

2

large

large

Statutory profit

722

531

683

36%

6%

Balance Sheet
Net loans & advances

88,356

79,192

76,634

12%

15%

Other external assets

96,512

72,353

66,47533%

45%

External assets

184,868

151,545

143,109

22%

29%

Customer deposits

129,733

107,838

102,463

20%

27%

Other deposits and borrowings

35,76428,35329,79126%

20%

Deposits and other borrowings

165,497

136,191

132,254

22%

25%

Other external liabilities

30,02525,834

21,29616%

41%

External liabilities

195,522

162,025

153,550

21%

27%

Risk weighted assets

108,953

96,87494,353

12%

15%

Average gross loans and advances

86,172

78,95076,4089%

13%

Average deposits and other borrowings

151,272

137,018

133,781

10%

13%

Ratios
Net interest margin - cash

1.10%

1.13%

1.20%

Operating expenses to operating income - cash

54.6%

59.3%

51.7%

Operating expenses to average assets - cash

1.19%

1.23%

1.22%

46

49

127

-6%

-64%

0.11%

0.12%

0.34%
40%

large

16%

-2%

2%

6%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

7

5

(42)

0.02%

0.01%

(0.11%)

609

527

622

Gross impaired assets as a % of GLA

0.68%

0.66%

0.80%

Total full time equivalent staff (FTE)

20,91020,512

19,653

1.

Includes APEA components of IIB (Mar 15: $771 million; Sep 14: $586 million; Mar 14: $653 million), Global Wealth (Mar 15: -$2 million; Sep 14: $4 million: Mar 14: $2 million) and GTSO
and Group Centre (Mar 15: -$26 million; Sept 14: -$55 million; Mar 14: $26 million).

80

GEOGRAPHIC REVIEWAsia Pacific, Europe & America geography
Table reflects AUD results for the APEA regions

Movement

Half Year
Mar 15$M
571

Sep 14$M
347

Europe & America

65

Pacific

86
722

Statutory Profit
Asia

Mar 14$M
498

Mar 15v. Sep 14
65%

100

60

-35%

8%

84

125

2%

-31%

531

683

36%

6%

Half Year
Mar 15$M
571

Sep 14$M
347

Europe & America

86

Pacific

86743

Cash Profit
Asia

Mar 15v. Mar 14
15%

Movement
Mar 14$M
497

Mar 15v. Sep 14
65%

104

59

-17%

46%

84

125

2%

-31%

535

681

39%

9%

Half Year

Mar 15v. Mar 14
15%

Movement

Net loans & advances
Asia

Mar 15$M
76,459Sep 14$M
68,733

Mar 14$M
67,802

Mar 15v. Sep 14
11%

Mar 15v. Mar 14
13%

Europe & America

8,006

6,923

5,450

16%

47%

Pacific

3,891

3,536

3,382

10%

15%

88,356

79,192

76,634

12%

15%

Half Year

Movement

Customer deposits
Asia

Mar 15$M
72,335

Sep 14$M
62,776

Mar 14$M
61,894

Europe & America

51,93640,30736,01329%

44%

Pacific

5,462

4,755

4,556

15%

20%

129,733

107,838

102,463

20%

27%

Half Year

Mar 15v. Sep 14
15%

Mar 15v. Mar 14
17%

Movement

Risk weighted assets
Asia

Mar 15$M
78,274

Sep 14$M
70,078Mar 14$M
70,222Europe & America

22,514

19,422

17,362

16%

30%

Pacific

8,165

7,374

6,769

11%

21%

108,953

96,87494,353

12%

15%

81

Mar 15v. Sep 14
12%

Mar 15v. Mar 14
11%

GEOGRAPHIC REVIEWAsia Pacific, Europe & America geography
Table reflects USD for the APEA region

Movement

Half Year
Mar 15$M759

Net interest income
Other operating income

Sep 14$M803

Mar 14$M
778

Mar 15v. Sep 14-5%

Mar 15v. Mar 14
-2%

924

835

945

11%

-2%

Operating income

1,683

1,638

1,723

3%

-2%

Operating expenses

(918)

(970)

(891)

-5%

3%

Profit before credit impairment and income tax

765

668

832

15%

-8%

Credit impairment charge

(44)

(51)

(77)

-14%

-43%

Profit before income tax

721

617

755

17%

-5%

Income tax expense and non-controlling interests

(112)

(119)

(134)

-6%

-16%

Cash profit

609

498

621

22%

-2%

Adjustments between statutory profit and cash profit

(17)

(3)

1

large

large

Statutory profit

592

495

622

20%

-5%

Balance Sheet
Net loans & advances

67,451

69,30970,756-3%-5%

Other external assets

73,67763,323

61,37716%

20%

External assets

141,128

132,632

132,133

6%

7%

Customer deposits

99,03894,37994,603

5%

5%

Other deposits and borrowings

27,30324,81527,50710%-1%

Deposits and other borrowings

126,341

119,194

122,110

6%

3%

Other external liabilities

22,921

22,61019,6631%

17%

External liabilities

149,262

141,804

141,7735%

5%

Risk weighted assets

83,17584,784

87,116-2%-5%

Average gross loans and advances

70,65973,314

69,628-4%

1%

Average deposits and other borrowings

124,040

127,245

121,910-3%

2%

Ratios
Net interest margin - cash

1.10%

1.13%

1.20%

Operating expenses to operating income - cash

54.5%

59.2%

51.7%

Operating expenses to average assets - cash

1.19%

1.23%

1.22%

38

47

115

-19%

-67%

0.11%

0.13%

0.33%
50%

large

1%

-19%

2%

6%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

6

4

(38)

0.02%

0.01%

(0.11%)

466

462

575

Gross impaired assets as a % of GLA

0.68%

0.66%

0.80%

Total full time equivalent staff (FTE)

20,91020,512

19,65382

GEOGRAPHIC REVIEWNew Zealand geography
Table reflects AUD results for the New Zealand geography

Movement

Half Year
Mar 15$M
1,330

Net interest income
Other operating income

Sep 14$M
1,280

Mar 14$M
1,250

Mar 15v. Sep 14
4%

Mar 15v. Mar 14
6%

476

425

487

12%

-2%

Operating income

1,806

1,705

1,737

6%

4%

Operating expenses

(691)

(678)

(661)

2%

5%

Profit before credit impairment and income tax

1,115

1,027

1,076

9%

4%

Credit impairment charge

(29)

(28)

36

4%

large
-2%

Profit before income tax

1,086

999

1,112

9%

Income tax expense and non-controlling interests

(300)

(269)

(303)

12%

-1%

Cash profit

786

730

809

8%

-3%

Adjustments between statutory profit and cash profit

34

57

(31)

-40%

large

Statutory profit

820

787

778

4%

5%

Balance Sheet
Net loans & advances

107,017

94,02396,150

14%

11%

Other external assets

30,637

24,96225,511

23%

20%

External assets

137,654

118,985

121,661

16%

13%

Customer deposits

78,85468,05869,43216%

14%

Other deposits and borrowings

7,635

6,665

6,597

15%

16%

Deposits and other borrowings

86,48974,72376,02916%

14%

Other external liabilities

31,37525,08623,98925%

31%

External liabilities

117,864

99,809100,018

18%

18%

Risk weighted assets

67,92961,42064,667

11%

5%

Average gross loans and advances

100,920

96,18993,3495%

8%

Average deposits and other borrowings

82,15077,27673,791

6%

11%

Ratios
Net interest margin - cash

2.27%

2.29%

2.32%

Operating expenses to operating income - cash

38.3%

39.8%

38.1%

Operating expenses to average assets - cash

1.05%

1.10%

1.10%

34

56

20

-39%

70%

0.07%

0.12%

0.04%
-82%

-91%

-19%

-35%

0%

-2%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

(5)

(28)

(56)

(0.01%)(0.06%)(0.12%)

510

631

788

Gross impaired assets as a % of GLA

0.47%

0.67%

0.81%

Total full time equivalent staff (FTE)

8,237

8,225

8,376

83

GEOGRAPHIC REVIEWNew Zealand geography
Table reflects NZD results for the New Zealand geography

Movement

Half Year
Mar 15$M
1,422

Net interest income
Other operating income

Sep 14$M
1,395

Mar 14$M
1,370

Mar 15v. Sep 142%

Mar 15v. Mar 14
4%

509

463

534

10%

-5%

Operating income

1,931

1,858

1,904

4%

1%

Operating expenses

(739)

(739)

(725)

0%

2%

Profit before credit impairment and income tax

1,192

1,119

1,179

7%

1%

Credit impairment charge

(31)

(30)

39

3%

large

Profit before income tax

1,161

1,089

1,218

7%

-5%

Income tax expense and non-controlling interests

(320)

(294)

(331)

9%

-3%

Cash profit

841

795

887

6%

-5%

Adjustments between statutory profit and cash profit

36

63

(34)

-43%

large

Statutory profit

877

858

853

2%

3%

Balance Sheet
Net loans & advances

109,031

105,485

102,571

3%

6%

Other external assets

31,21428,00527,215

11%

15%
8%

External assets

140,245

133,490

129,786

5%

Customer deposits

80,33876,35574,069

5%

8%

Other deposits and borrowings

7,778

7,478

7,038

4%

11%

Deposits and other borrowings

88,116

83,833

81,107

5%

9%Other external liabilities

31,96628,14325,59014%25%

External liabilities

120,082

111,976

106,697

7%

13%

Risk weighted assets

69,20868,90868,9850%

0%

Average gross loans and advances

107,898

104,882

102,298

3%

5%

Average deposits and other borrowings

87,83084,26380,865

4%

9%

Ratios
Net interest margin - cash

2.27%

2.29%

2.32%

Operating expenses to operating income - cash

38.3%

39.8%

38.1%

Operating expenses to average assets - cash

1.05%

1.10%

1.10%

37

61

22

-39%

68%

0.07%

0.12%

0.04%
-81%

-90%

-26%

-38%

0%

-2%

Individual credit impairment charge/(release) - cash
Individual credit impairment charge/(release) as a % of average GLA - cash
Collective credit impairment charge/(release) - cash
Collective credit impairment charge/(release) as a % of average GLA - cash
Gross impaired assets

(6)

(31)

(61)

(0.01%)(0.06%)(0.12%)

523

708

843

Gross impaired assets as a % of GLA

0.48%

0.67%

0.82%

Total full time equivalent staff (FTE)

8,237

8,225

8,376

84

PROFIT RECONCILIATIONCONTENTS

Section 7 – Profit Reconciliation
Adjustments between statutory profit and cash profit
Explanation of adjustments between statutory profit and cash profit
Other reclassifications between statutory profit and cash profit
Reconciliation of statutory profit to cash profit

85

PROFIT RECONCILIATION
Non-IFRS information
The Group provides additional measures of performance in the Results Announcement which are prepared on a basis other than in accordance withaccounting standards. The guidance provided in ASIC’s RG230 has been followed when presenting this information.

Adjustments between statutory profit and cash profit
Statutory profit has been adjusted to exclude non-core items to arrive at cash profit, which is provided to assist readers to understand the results for theongoing business activities of the Group. The adjustments made in arriving at cash profit are included in statutory profit which is subject to review within
the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review by the external
auditor, however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis across eachperiod presented.
Movement

Half Year

Statutory profit attributable to shareholders of the Company
Adjustments between statutory profit and cash profit
Cash Profit

Mar 15$M
3,506

Sep 14$M
3,879

Mar 14$M
3,392

Mar 15v. Sep 14-10%

Mar 15v. Mar 14
3%

170

(277)

123

large

38%

3,676

3,602

3,515

2%

5%

Movement

Half Year

Adjustments between statutory profit and cash profit
Treasury shares adjustments
Revaluation of policy liabilities

Mar 15$M

Sep 14$M

Mar 14
$M

79

(13)

37

large

large

(67)

(23)

(3)

large

large

Mar 15v. Sep 14

Mar 15v. Mar 14

Economic hedging

(14)

(150)

78

-91%

large

Revenue and net investment hedges

176

(119)

18

large

large

Structured credit intermediation trades
Total adjustments between statutory profit and cash profit

(4)

28

(7)

large

-43%

170

(277)

123

large

38%

Explanation of adjustments between statutory profit and cash profit•

Treasury shares adjustment
ANZ shares held by the Group in the funds management and insurance business are deemed to be Treasury shares for accounting purposes.
Dividends and realised and unrealised gains and losses from these shares are reversed as these are not permitted to be recognised in income forstatutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits
because the Treasury shares are held to support policy liabilities and are revalued through the Income Statement. Accordingly, the half year gain of$79 million after tax ($86 million pre tax) eliminated for statutory accounting purposes has been added back to cash profit.

•

Revaluation of policy liabilities
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation,with the impact of changes in the market discount rate each period being reflected in the income statement. ANZ includes the impact on theremeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.

86

PROFIT RECONCILIATION•

Economic hedging and Revenue and net investment hedges
The Group enters into economic hedges to manage its interest rate and foreign exchange risk. The application of AASB 139: Financial Instruments –Recognition and Measurement results in fair value gains and losses being recognised within the income statement. ANZ removes the mark-to-market
adjustments from cash profit as the profit or loss resulting from the transactions will reverse over time to match with the profit or loss from theeconomically hedged item as part of cash profit. This includes gains and losses arising from:–approved classes of derivatives not designated in accounting hedge relationships but which are considered to be economic hedges, including
hedges of NZD and USD revenue and expense streams; and–ineffectiveness from designated accounting hedges.

In the table below, funding and lending related swaps are primarily cross currency interest rate swaps which are being used to convert the proceedsof foreign currency debt issuances into floating rate Australian dollar and New Zealand dollar debt. As these swaps do not qualify for hedge
accounting, movements in the fair values are recorded in the income statement. The main drivers of these fair values are currency basis spreads andthe Australian dollar and New Zealand dollar fluctuation against other major funding currencies. This category also includes economic hedges of
select structured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers of these fair value
adjustments are Australian and New Zealand yield curve movements.
For funding related swaps in the March 2015 half, gains from widening spreads in the USD/EUR currency pair and the weakening in the AUD against
the USD were partially offset by losses driven from falls in the AUD and NZD yield curves.
Losses on revenue and net investment hedges were the result of significant weakening in the AUD against both the USD and NZD exchange rates
during the March 2015 half.

Half Year

Adjustments to the income statement
Timing differences where IFRS results in asymmetry between the hedge and hedged items

Mar 15$M

Sep 14$M

Mar 14$M

Funding and lending related swaps

(19)

(203)

100

Revenue and net investment hedges

252

(169)

26

(1)

(10)

10

Increase/(decrease) to cash profit before tax

232

(382)

136

Increase/(decrease) to cash profit after tax

162

(269)

96

Ineffective portion of designated accounting hedges

Cumulative increase/(decrease) to cash profit pre-tax
relating to economic hedging

As at
Mar 15$M

Sep 14$M

Mar 14$M

Timing differences where IFRS results in asymmetry between thehedge and hedged items (before tax)
Funding and lending related swaps

556

575

778

Revenue and net investment hedges

288

36

205

Ineffective portion of designated accounting hedges

(26)

(25)

(15)

818

586

968

87

PROFIT RECONCILIATION•

Structured credit intermediation trades
ANZ entered into a series of structured credit intermediation trades with US financial guarantors from 2004 to 2007. The underlying structures
involved credit default swaps (CDS) over synthetic collateralised debt obligations (CDOs), portfolios of external collateralised loan obligations (CLOs)
or specific bonds/floating rate notes (FRNs). ANZ sold protection using credit default swaps over these structures and then to mitigate risk,
purchased protection via credit default swaps over the same structures from eight US financial guarantors.
Being derivatives, both the sold protection and purchased protection are measured at fair value and marked-to-model. Prior to the commencement of
the global financial crisis, movements in valuations of these positions were not significant and largely offset each other in income. Following the onsetof the financial crisis, the purchased protection has provided only a partial offset against movements in valuation of the sold protection because:–

one of the counterparties to the purchased protection defaulted and many of the remaining were downgraded; and–a credit valuation adjustment is applied to the remaining counterparties to the purchased protection reflective of changes to their credit
worthiness.

ANZ actively monitors this portfolio with a view to reducing the exposures via termination and restructuring of both the bought and sold protection if
and when ANZ deems it cost effective relative to the perceived risk associated with a specific trade or counterparty. During the March 2015 half, a
net gain of $2 million (including termination costs and release of CVA) was recognised following the termination of one bought protection position
along with the corresponding sold protection position. As at 31 March 2015, ANZ’s remaining exposure is against two financial guarantors.
The bought and sold protection trades are by nature largely offsetting, with the notional amount on the outstanding bought CDSs and outstanding
sold CDSs at 31 March 2015 each amounting to USD 0.6 billion (Sep 14: USD 1.0 billion; Mar 14: USD 4.4 billion). The decrease in notionalbalances of USD 0.4 billion from September 2014 is primarily due to the termination of trades mentioned above.
The profit and loss impact of credit risk on structured credit derivatives remains volatile reflecting the impact of market movements in credit spreads
and AUD/USD rates.
The (gain)/loss on structured credit intermediation trades is included as an adjustment to cash profit as it relates to a legacy non-core businesswhere, unless terminated early, the fair value movements are expected to reverse to zero in future periods.
As at
Mar 15$M(5)Increase/(decrease) to cash profit
Profit before income tax

Movement

Sep 14$M
31

Mar 14$M(9)

Mar 15v. Sep 14
large

Mar 15v. Mar 14-44%

Income tax expense

1

(3)

2

large

-50%

Profit after income tax

(4)

28

(7)

large

-43%

As at
Mar 15$M
78

Financial impacts of credit intermediation trades
Mark-to-market exposure to financial guarantors

Movement

Sep 14$M
82

Mar 14$M
136

Mar 15v. Sep 14-5%

Mar 15v. Mar 14-43%

Cumulative costs relating tofinancial guarantors1
CVA for outstanding transactions

19

24

33

-21%

-42%

Realised close out and hedge costs

373

373

333

0%

12%

Cumulative life to date charges

392

397

366

-1%

7%

1.

The cumulative costs in managing the positions include realised losses relating to restructuring of trades in order to reduce risks and realised losses on termination of sold protection trades.
It also includes foreign exchange hedging losses.

Other reclassifications between statutory profit and cash profit•

Credit risk on impaired derivatives (nil profit after tax impact)
The charge to income for credit valuation adjustments of $16 million on defaulted and impaired derivative exposures has been reclassified to cash
credit impairment charges in the March 2015 half (Sep 14 half: $2 million charge; Mar 14 half: $1 million charge). The reclassification has been madeto reflect the manner in which the defaulted and impaired derivatives are managed.

•

Policyholders tax gross up (nil profit after tax impact)
For statutory reporting purposes, policyholder income tax and other related taxes paid on behalf of policyholders are included in both net funds
management and insurance income and the Group’s income tax expense. The gross up of $277 million for the March 2015 half (Sep 14 half:$213 million; Mar 14 half: $29 million) has been excluded from the cash results as it does not reflect the underlying performance of the business
which is assessed on a net of policyholder tax basis.

88

PROFIT RECONCILIATIONThis page has been left blank intentionally89

PROFIT RECONCILIATION
Reconciliation of statutory profit to cash profit
March 2015 Half Year
Statutory

Adjustments to statutory profit

profitTreasurysharesadjustment

Policyholders
tax gross up

Revaluationof policy
liabilities

Net interest income

$M
7,138

$M
-

$M
-

$M
-

Net fee and commission income

1,308

-

-

-

Net foreign exchange earnings

259

-

-

-

Profit on trading instruments

94

-

-

-

Net funds management and insurance income

979

86

(277)

(97)

Other

452

-

-

-

Other operating income

3,092

86

(277)

(97)

Operating income

10,230

86

(277)

(97)

Operating expenses(4,593)

-

-

(97)

Profit before credit impairment and tax

5,637

86

(277)

Credit impairment charge

(494)

-

-

-

Profit before income tax

5,143

86

(277)

(97)

Income tax expense(1,629)

(7)

277

30

(8)

-

-

-

3,506

79

-

(67)

Non-controlling interests
ProfitSeptember 2014 Half YearNet interest income

7,032

-

-

-

Net fee and commission income

1,255

-

-

-

Net foreign exchange earnings

480

-

-

-

Profit on trading instruments

124

-

-

-

Net funds management and insurance income

927

(16)

(213)

(32)

Other

702

-

-

-

Other operating income

3,488

(16)

(213)

(32)

Operating income

10,520

(16)

(213)

(32)

Operating expenses(4,474)---

Profit before credit impairment and tax

6,046

(16)

(213)

(32)

Credit impairment charge

(459)

-

-

-

Profit before income tax

5,587

(16)

(213)

(32)

Income tax expense(1,702)

3

213

9

(6)

-

-

-

3,879

(13)

-

(23)

Non-controlling interests
ProfitMarch 2014 Half YearNet interest income

6,778

-

-

-

Net fee and commission income

1,250

-

-

-

Net foreign exchange earnings

593

-

-

-

Profit on trading instruments

15

-

-

-

Net funds management and insurance income

611

40

(29)

(5)

Other

287

-

-

-

2,756

40

(29)

(5)

Operating income

9,534

40

(29)

(5)

Operating expenses(4,286)---

Profit before credit impairment and tax

5,248

40

(29)

(5)

Other operating income

Credit impairment charge

(527)

-

-

-

Profit before income tax

4,721

40

(29)

(5)

Income tax expense(1,323)

(3)

29

2

(6)

-

-

-

3,392

37

-

(3)

Non-controlling interests
Profit90

PROFIT RECONCILIATIONMarch 2015 Half Year
Adjustments to statutory profit

CashprofitEconomic
hedging

Revenue andnet investment
hedges

Structured
creditintermediation trades

Credit risk
on impaired
derivatives

Total
adjustments tostatutory profit

$M
-

$M
-

$M
-

$M
-

$M
-

$M
7,138

-

-

-

-

-

1,308

-

252

-

-

252

511

12

-

(5)

16

23

117

-

-

-

-

(288)

691

(32)

-

-

-

(32)

420

(20)

252

(5)

16

(45)

3,047

(20)

252

(5)

16

(45)

10,185

-

-

-

-

-

(4,593)

(20)

252

(5)

16

(45)

5,592

-

-

-

(16)

(16)

(510)

(20)

252

(5)

-

(61)

5,082

6

(76)

1

-

231

(1,398)

-

-

-

-

-

(8)

(14)

176

(4)

-

170

3,676

September 2014 Half Year
1

-

-

-

1

7,033

-

-

-

-

-

1,255
314

3

(169)

-

-

(166)

4

-

31

2

37

161

-

-

-

-

(261)

666

(221)

-

-

-

(221)

481

(214)

(169)

31

2

(611)

2,877

(213)

(169)

31

2

(610)

9,910

-

-

-

-

-

(4,474)

(213)

(169)

31

2

(610)

5,436

-

-

-

(2)

(2)

(461)

(213)

(169)

31

-

(612)

4,975

63

50

(3)

-

335

(1,367)

-

-

-

-

-

(6)

(150)

(119)

28

-

(277)

3,602

March 2014 Half Year
(14)

-

-

-

(14)

6,764

-

-

-

-

-

1,250

-

26

-

-

26

619

-

-

(9)

1

(8)

7

-

-

-

-

6

617

124

-

-

-

124

411

124

26

(9)

1

148

2,904

110

26

(9)

1

134

9,668

-

-

-

-

-

(4,286)

110

26

(9)

1

134

5,382

-

-

-

(1)

(1)

(528)

110

26

(9)

-

133

4,854

(32)

(8)

2

-

(10)

(1,333)

-

-

-

-

-

(6)

78

18

(7)

-

123

3,515

91

PROFIT RECONCILIATIONThis page has been left blank intentionally92

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTSCONTENTSPAGE

Condensed Consolidated Income Statement95

Condensed Consolidated Statement of Comprehensive Income

96

Condensed Consolidated Balance Sheet

97

Condensed Consolidated Cash Flow Statement98

Condensed Consolidated Statement of Changes in Equity

99

Notes to Condensed Consolidated Financial Statements

100

93

DIR
RECTORS’ RE
EPORT

The
e Directors preseent their report onn the Condensedd Consolidated F
Financial Stateme
ents for the half yearyended 31 M
March 2015.
Directors
e names of the D
Directors of the Company
C
who held office during aand since the end
d of the half year are:
The
Mr DM Gonski, AC

Chairman

Mr MRP Smith, OBE
E

Director and Chief
C
Executive OfficerO

Ms IR Atlas

Director

Ms PJ Dwyer

Director

Mr Lee Hsien Yang

Director

Mr GR Liebelt

DirectorAC
Mr IJ Macfarlane, A

Director

Mr JT Macfarlane

Director

Res
sult
The
e consolidated prrofit attributable tot shareholders ofo the Company was $3,506 million. Further details are containedd in the CFO’s Ov
verview on pagess 19
to 45
4 which forms p
part of this report, and in the Conddensed Consoliddated Financial Statements.
S

Rev
view of operatioons
A reeview of the operations of the Grroup during the half year and the results of those operations are coontained in the C
CFO’s Overview on pages 19 to 45
4which forms part of this report.

ad auditor’s independence dec
claration
Lea
Thee lead auditor’s inndependence deeclaration given underu
section 3077C of the Corporrations Act 2001 (as amended) iss set out on pagee 125 which formms
parrt of this report.

unding of amou
unts
Rou
The
e amounts contained in these Co
ondensed Consolidated Financial Statements hav
ve been rounded to the nearest m
million dollars, exc
cept whereotherwise indicated, as permitted byy ASIC Class Ord
der 98/100.

Sig
gnificant events since balance dated
On 8 April 2015, thee Full Federal Co
ourt delivered jud
dgment in respecct of appeals by bothbparties in the class action litiigation brought by
b IMF Bentham
Lim
mited in March 20013. The Full Fed
deral Court foundd in ANZ’s favourr in respect of all fees subject to appeala(in relatioon to both the pen
nalty and statutooryclaiims). IMF Bentha
am Limited has inndicated that it in
ntends to seek sppecial leave to ap
ppeal the decisioon to the High Coourt of Australia. Refer to Note 19
9 for
furtther information.
On 4 May 2015, thee Group announcced its intention tot sell the Esandaa dealer finance business (repres
senting approxim
mately $8.3 billion
n in lending asseets).
her than the mattters above, theree have been no significant eventss from 31 March 20152
to the date of this report.
Oth

Signed in accordance with a resoluttion of the Directo
ors.

Dav
vid M Gonski, AACCha
airmanMichaelM
R P Smitth, OBE
Director
D

4 May
M 201594

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited
Half Year

Note
Interest income
Interest expense

Movement

Mar 15$M
15,394

Sep 14$M
15,094

Mar 14$M
14,430Mar 15v. Sep 142%

Mar 15v. Mar 14
7%(8,256)(8,062)(7,652)

2%

8%

2

7,138

7,032

6,778

2%

5%

Other operating income

2

1,799

2,291

1,898

-21%

-5%

Net funds management and insurance income

2

979

927

611

6%

60%

Share of associates' profit

2,18

314

270

247

16%

27%

10,23010,520

9,534

-3%

7%

(4,593)(4,474)(4,286)

3%

7%

5,637

6,046

5,248

-7%

7%

Net interest income

Operating income
Operating expenses

3

Profit before credit impairment and income tax
Credit impairment charge

8

(494)

(459)

(527)

8%

-6%

5,143

5,587

4,721

-8%

9%

(1,629)(1,702)(1,323)

-4%

23%

3,514

3,885

3,398

-10%

3%

Profit before income tax
Income tax expense

4

Profit for the period
Comprising:
Profit attributable to non-controlling interests
Profit attributable to shareholders of the Company

8

6

6

33%

33%

3,506

3,879

3,392

-10%

3%

3%

Earnings per ordinary share (cents)
Basic

6

128.0

142.3

124.8

-10%

Diluted

6

124.6

136.5

120.6

-9%

3%

5

86

95

83

-9%

4%

Dividend per ordinary share (cents)

The notes appearing on pages 100 to 123 form an integral part of the Condensed Consolidated Financial Statements.

95

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited
Movement

Half Year
Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

3,514

3,885

3,398

-10%

3%

Remeasurement gain/(loss) on defined benefit plans

(2)

7

36

large

large

Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities
designated at fair value

13

(19)

(16)

large

large

Remeasurement gain/(loss) on defined benefit plans

3

(1)

(10)

large

large

Fair value gain/(loss) attributable to changes in own credit risk of financial liabilities
designated at fair value

(4)

5

5

large

large

2,181

(83)

570

large

large

-

48

(11)

-100%

-100%

Profit for the period
Other comprehensive income

Items that will not be reclassified subsequently to profit or loss

Income tax on items that will not be reclassified subsequently to profit or loss

Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve
Exchange differences taken to equity1
Exchange differences transferred to income statement
Available-for-sale revaluation reserve
Valuation gain/(loss) taken to equity

117

1

133

large

-12%

Transferred to income statement

(50)

(2)

(45)

large

11%

Valuation gain/(loss) taken to equity

237

165

-

44%

n/a

Transferred to income statement

(12)

(15)

(16)

-20%

-25%

50

8

(32)

large

large

Cash flow hedge reserve

Share of associates' other comprehensive income2

Income tax on items that may be reclassified subsequently to profit or loss
Available-for-sale assets revaluation reserve

(17)

3

(26)

large

-35%

Cash flow hedge reserve

(69)

(44)

3

57%

large

Other comprehensive income net of tax

2,447

73

591

large

large

Total comprehensive income for the period

5,961

3,958

3,989

51%

49%

Comprising total comprehensive income attributable to:Non-controlling interests
Shareholders of the Company
1.
2.

18

10

6

80%

large

5,943

3,948

3,983

51%

49%

Includes foreign currency translation differences attributable to non-controlling interests of $10 million gain (Sept 14 half: $4 million gain; Mar 14: nil)
Share of associates other comprehensive income is comprised of Available-for-sale assets reserve gain of $47 million (Sep 14 half: gain of $7 million; Mar 14 half: loss of $32 million);
Foreign currency translation reserve gain of $3 million (Sep 14 half: nil; Mar 14 half: nil) and Cash flow hedge reserve gain of nil (Sep 14 half: gain of $1 million; Mar 14 half: nil).

The notes appearing on pages 100 to 123 form an integral part of the Condensed Consolidated Financial Statements.

96

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

As at

Movement

Mar 15$M
46,004

Sep 14$M
32,559Mar 14$M
33,651

Mar 15v. Sep 14
41%

Mar 15v. Mar 14
37%

Settlement balances owed to ANZ

22,57020,241

16,20912%

39%

Collateral paid

10,707

5,459

6,219

96%

72%

Trading securities

51,386

49,692

46,1703%11%Derivative financial instruments

73,58056,36943,82931%

68%

Available-for-sale assets

38,33630,917

27,33024%

40%558,203521,752

509,2507%

10%Regulatory deposits

1,804

1,565

2,205

15%

-18%

Investment in associates

5,315

4,582

4,323

16%

23%

38

38

64

0%

-41%
-64%

AssetsCash

Net loans and advances

Note

7

Current tax assets
Deferred tax assets

162

417

446

-61%

Goodwill and other intangible assets

8,384

7,950

7,969

5%

5%

Investments backing policy liabilities

36,49533,57933,1979%10%Premises and equipment

2,203

2,181

2,150

1%

2%

Other assets

4,900

4,791

4,803

2%

2%

Total assets

860,087

772,092

737,815

11%

17%

Settlement balances owed by ANZ

7,759

10,114

8,133

-23%

-5%

Collateral received

4,844

5,599

3,880

-13%

25%

567,215510,079

498,31811%

14%

73,21052,92545,876

38%

60%

123

449

285

-73%

-57%

Liabilities

Deposits and other borrowings

10

Derivative financial instruments
Current tax liabilities
Deferred tax liabilities

322

120

41

large

large

Policy liabilities

36,82034,55433,4027%

10%

External unit holder liabilities (life insurance funds)

3,489

3,181

3,334

10%

5%

Payables and other liabilities

10,99910,984

9,615

0%

14%

Provisions

1,128

1,100

1,115

3%

1%

Debt issuances

85,66480,09673,552

7%

16%
24%

Subordinated debt

11

16,463

13,607

13,22621%

Total liabilities

808,036

722,808

690,777

12%

17%

Net assets

52,05149,28447,0386%

11%24,152

24,031

23,529

1%

3%

-

871

871

-100%

-100%

Shareholders' equity
Ordinary share capitalPreference share capital
Reserves

2,188

(239)

(334)

large

large

Retained earnings

25,61624,54422,905

4%

12%

Share capital and reserves attributable toshareholders of the Company

13

51,95649,207

46,971

6%

11%

Non-controlling interests

13

95

77

67

23%

42%

Total shareholders' equity

13

52,05149,28447,038

6%

11%

The notes appearing on pages 100 to 123 form an integral part of the Condensed Consolidated Financial Statements.

97CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Australia and New Zealand Banking Group Limited

Note
Cash flows from operating activities
Interest received
Interest paid
Dividends received
Other operating income received
Other operating expenses paid
Income taxes paid
Net cash flows from funds management and insurance businessPremiums, other income and life investment deposits received
Investment income and policy deposits received
Claims and policy liability payments
Commission expense paid
Cash flows from operating activities before changes inoperating assets and liabilities
Changes in operating assets and liabilities arising fromcash flow movements(Increase)/decrease in operating assets
Collateral paid
Trading securities
Net loans and advances
Net cash flows from investments backing policy liabilities
Purchase of insurance assets
Proceeds from sale/maturity of insurance assets
Increase/(decrease) in operating liabilities
Deposits and other borrowings
Settlement balances owed by ANZ
Collateral received
Payables and other liabilities
Change in operating assets and liabilities arising fromcash flow movements
Net cash provided by operating activities
Cash flows from investing activities
Available-for-sale assets
Purchases
Proceeds from sale or maturity
Controlled entities and associates
Proceeds from sale (net of cash disposed)
Premises and equipment
Purchases
Other assets
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Debt issuances
Issue proceeds
Redemptions
Subordinated debt
Issue proceeds
Redemptions
Dividends paid
Share capital issues
Share buyback
Net cash provided by/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period

16

The notes appearing on pages 100 to 123 form an integral part of the Condensed Consolidated Financial Statements.

98

Inflows(Outflows)

Half Year
Inflows(Outflows)

Inflows(Outflows)

Mar 15$M

Sep 14$M

Mar 14$M

15,398(8,313)29
11,405(4,260)(1,649)15,018(7,497)108
680(3,907)(1,340)14,309(7,389)19
2,024(4,216)(1,867)3,589
191(2,996)
(321)

3,997
572
(2,936)
(241)

3,552
48
(2,642)(230)

13,073

4,454

3,608

(4,505)
410(16,726)875(3,610)(14,079)

396(4,990)(21,075)(3,581)
3,738(2,382)
2,408(2,474)2,217

30,583(2,695)(1,364)
432

9,195
1,982
1,505
563

27,397
(624)
(70)
347

6,292

(3,543)

1,124

19,365911

4,732(15,203)
10,321(5,939)3,189(6,713)
7,947

4

242

9

(119)
(147)
(5,144)(235)
564(2,179)

(135)
(856)
252

8,597
(9,132)

6,342(1,850)10,814(8,860)2,497(2,310)(755)(1,103)
13,11848,2294,115
65,462

1,384(1,081)(1,857)
2
2,940
1,672
45,853704
48,2291,874(1,505)(1,970)
2
(500)
(145)
4,839
41,111(97)
45,853

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

Ordinaryshare Preference
capital share capital$M$M
As at 1 October 2013

1

Reserves$M

Share capital andreserves attributable
Retained to shareholders ofearnings
the Company$M$M

Noncontrollinginterests$M

Total
Shareholders'equity$M

23,641871(907)

21,93645,54162

45,603

Profit or loss
Other comprehensive income for the period

-

-

576

3,392
15

3,392
591

6
-

3,398
591

Total comprehensive income for the period
Transactions with equity holders intheir capacity as equity holders:
Dividends paid

-

-

576

3,407

3,983

6

3,989

-

-

-

(2,458)(2,458)(1)(2,459)

-

-

-

12

12

-

12

476

-

-

-

476

-

476

2

-

5
-

-

5
2

-

5
2

Dividend income on treasury shares held within
the Group's life insurance statutory funds
Dividend reinvestment plan
Other equity movements:
Share based payments
Group share option scheme
Treasury shares Global Wealth adjustment
Group employee share acquisition
schemeGroup share buyback
Transfer of options/rights lapsed
As at 31 March 2014

(2)

-

-

-

(2)

-

(2)

(88)

-

-

-

(88)

-

(88)

(500)
-

-

(8)

8

(500)
-

-

(500)
-

23,529871(334)

22,905

46,971

67

47,038

Profit or loss

-

-

-

3,879

3,879

6

3,885

Other comprehensive income for the period

-

-

77

(8)

69

4

73

Total comprehensive income for the period

-

-

77

3,871

3,948

10

3,958

-

-

-

(2,242)(2,242)-(2,242)

Transactions with equity holders intheir capacity as equity holders:
Dividends paid
Dividend income on treasury shares held within
the Group's life insurance statutory funds
Dividend reinvestment plan
Transactions with non-controlling interests

-

-

-

10

10

-

10

375

-

-

-

375

-

375

-

-

10

-

10

-

10

8

Other equity movements:
Share based payments

-

-

8

-

8

-

Group share option scheme

2

-

-

-

2

-

2

Treasury shares Global Wealth adjustment

26

-

-

-

26

-

26

Group employee share acquisition
scheme

99

-

-

-

99

-

99

As at 30 September 2014

24,031871(239)

24,54449,20777

49,284

Profit or loss

-

-

-

3,506

3,506

8

3,514

Other comprehensive income for the period

-

-

2,427

10

2,437

10

2,447

Total comprehensive income for the period

-

-

2,427

3,516

5,943

18

5,961

Dividends paid

-

-

-

(2,579)(2,579)-(2,579)Dividend income on treasury shares held within
the Group's life insurance statutory funds

-

-

-

12

12

-

12
257

Transactions with equity holders intheir capacity as equity holders:

Dividend reinvestment plan

257

-

-

-

257

-

Transactions with non-controlling interests

-

-

-

-

-

-

-

Preference shares bought back

-

(871)

-

-

(871)

-

(871)

7

Other equity movements:
Share based payments

-

-

7

-

7

-

Group share option scheme

-

-

-

-

-

-

-

Treasury shares Global Wealth adjustment

(39)

-

-

-

(39)

-

(39)

Group employee share acquisition
scheme

(97)

-

-

-

(97)

-

(97)

Transfer of options/rights lapsed

-

-

(7)

7

-

-

-

Foreign exchange gains on preference sharecapital bought back

-

-

-

116

116

-

116

24,152-

2,188

25,616

51,95695

52,051As at 31 March 2015
1.

Further information on reserves is disclosed in Note 13.

The notes appearing on pages 100 to 123 form an integral part of the Condensed Consolidated Financial Statements.

99

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
These Condensed Consolidated Financial Statements:

have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (“AASs”);

should be read in conjunction with ANZ’s Annual Financial Statements for the year ended 30 September 2014 and any public announcements madeby the Parent Entity and its controlled entities (the Group) for the half year ended 31 March 2015 in accordance with the continuous disclosure
obligations under the Corporations Act 2001 and the ASX Listing Rules;are Condensed Consolidated Financial Statements as defined in the AASB 134 Interim Financial Reporting (“AASB 134”). This report does notinclude all notes of the type normally included in ANZ’s Annual Financial Statements;are presented in Australian dollars unless otherwise stated; andwere approved by the Board of Directors on 4 May 2015.

i)Statement of compliance

These Condensed Consolidated Financial Statements have been prepared in accordance with the Corporations Act 2001 and AASB 134 which ensurescompliance with IAS 34 Interim Financial Reporting.
ii) Accounting policies
These Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using methods of computationconsistent with those applied in the 2014 ANZ Annual Financial Statements.
iii) Basis of measurement
The financial information has been prepared in accordance with the historical cost basis except that the following assets and liabilities are stated at theirfair value:

derivative financial instruments as well as, in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure;available-for-sale financial assets;financial instruments held for trading; and

assets and liabilities designated at fair value through profit and loss.

In accordance with AASB 1038 Life Insurance Contracts, life insurance liabilities are measured using the Margin on Services model.
In accordance with AASB 119 Employee Benefits, defined benefit obligations are measured using the Projected Unit Credit method.
iv) Use of estimates, assumptions and judgments
The preparation of these Condensed Consolidated Financial Statements requires the use of management judgement, estimates and assumptions that
affect reported amounts and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include
complex or subjective decisions or assessments, are covered in Note 2 of the 2014 Annual Financial Statements. Such estimates and judgements arereviewed on an ongoing basis.
v)

Rounding of amounts

The amounts contained in these Condensed Consolidated Financial Statements have been rounded to the nearest million dollars, except whereotherwise indicated, as permitted by Australian Securities and Investments Commission Class Order 98/100.
vi) Comparatives
Certain amounts in the comparative information have been reclassified to conform with current period financial statement presentation.
vii) New accounting standards not yet effective
The following accounting standards relevant to the Group have been issued but are not yet effective and have not been applied in these Condensed
Consolidated Financial Statements:

AASB 9 Financial Instruments

The AASB issued the final version of AASB 9 in December 2014. When operative, this standard will replace AASB 139 Financial Instruments:
Recognition and Measurement. AASB 9 addresses recognition and measurement requirements for financial assets and financial liabilities, impairment
requirements that introduce an expected credit loss impairment model and general hedge accounting requirements which more closely align with risk
management activities undertaken when hedging financial and non-financial risks. AASB 9 is not mandatorily effective for the Group until 1 October
2018. The Group is in the process of assessing the impact of application of AASB 9 and is not yet able to reasonably estimate the impact on its financial
statements.


AASB 15 Revenue from Contracts with Customers

The AASB issued AASB 15 in December 2014. The standard is not mandatorily effective for the Group until 1 October 2017. AASB 15 contains new
requirements for the recognition of revenue and additional disclosures about revenue. While it is expected that a significant proportion of the Group’s
revenue will be outside the scope of AASB 15, the Group is in the process of assessing the impact of application of AASB 15 and is not yet able toreasonably estimate the impact on its financial statements.

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. IncomeHalf Year

Movement

Interest income

Mar 15$M
15,394

Sep 14$M
15,094

Mar 14$M
14,430Mar 15v. Sep 142%

Mar 15v. Mar 14
7%

Interest expense(8,256)(8,062)(7,652)

2%

8%

Net interest income

7,138

7,032

6,778

2%

5%

i) Fee and commission income
Lending fees1

422

383

396

10%

7%

Non-lending fees and commissions2

1,388

1,343

1,305

3%

6%

Total fee and commission income2

1,810

1,726

1,701

5%

6%

Fee and commission expense2,3

(502)

(471)

(451)

7%

11%

Net fee and commission income2

1,308

1,255

1,250

4%

5%

478

459

458

4%

4%

ii) Net funds management and insurance income
Funds management income

3,149

1,424

1,232

large

large

Insurance premium income

718

780

534

-8%

34%

Commission income/(expense)

(239)

(241)

(230)

-1%

4%

Claims

(341)

(362)

(345)

-6%

-1%

(2,700)(1,149)

(998)

large

large

Investment income

Changes in policy liabilities4
Elimination of treasury share (gain)/loss

(86)

16

(40)

large

large

Total net funds management and insurance income

979

927

611

6%

60%

iii) Share of associates' profit

314

270

247

16%

27%

-56%

iv) Other income
Net foreign exchange earnings

259

480

593

-46%

Net gains from trading securities and derivatives

94

123

15

-24%

large

Credit risk on credit intermediation trades

5

(31)

9

large

-44%

Movement on financial instruments measured at fairvalue through profit & loss5

32

221

(124)

-86%

large

Brokerage income

21%

34

22

28

55%

Loss on divestment of SSI

-

(21)

-

-100%

n/a

Dilution gain on investment in Bank of Tianjin

-

-

12

n/a

-100%

Insurance settlement

-

-

26

n/a

-100%

Gain on sale of ANZ Trustees

-

125

-

-100%

n/a

2

Other

67

117

89

-43%

-25%

Total other income2

491

1,036

648

-53%

-24%

Total other operating income6

3,092

3,488

2,756

-11%

12%

Total income

18,486

18,582

17,186

-1%

8%

1.
2.

3.
4.

5.

6.

Lending fees exclude fees treated as part of the effective yield calculation in interest income.
Certain cards related fees that are integral to the generation of income have been reclassified within total income in the current period to better reflect the nature of the items.
Comparatives have been restated. For the Sep 14 half fees of $252 million were moved from ‘non-lending fees and commissions’ and fees of $5 million were moved from ‘Other income’and included in ‘fee and commission expenses’ (Mar 14 half: $236 million and $5 million respectively).
Includes interchange fees paid.
Includes policyholder tax gross up, which represents contribution tax (recovered at 15% on the super contributions made by members) debited to the policyholder account once a year in
July when the statement is issued to the members at the end of the 30 June financial year.
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange
risk on funding instruments, ineffective portions of cashflow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit and loss.
Total other operating income includes external dividend income of nil (Sep 14 half: $0.9 million; Mar 14 half: $0.2 million).

101

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Operating expenses
Half Year

Personnel
Employee entitlements and taxes
Salaries and wages
Superannuation costs - defined benefit plans

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

155

147

131

5%

18%

1,852

1,750

1,745

6%

6%

3

6

4

-50%

-25%

Superannuation costs - defined contribution plans

155

152

148

2%

5%

Equity-settled share-based payments

108

105

110

3%

-2%

Other

442

398

392

11%

13%

2,715

2,558

2,530

6%

7%

-2%

Total personnel expenses

Premises
Depreciation and amortisation

97

99

99

-2%

Rent

238

224

226

6%

5%

Utilities and other outgoings

87

89

89

-2%

-2%

Other
Total premises expenses

33

34

28

-3%

18%

455

446

442

2%

3%

Technology
Data communications

50

43

61

16%

-18%

Depreciation and amortisation

332

285

265

16%

25%

Licences and outsourced services

209

204

196

2%

7%

Rentals and repairs

78

84

69

-7%

13%

Software impairment

4

14

1

-71%

large

Other

28

30

14

-7%

100%

Total technology expenses

701

660

606

6%

16%

Restructuring

10

78

35

-87%

-71%

Advertising and public relations

128

153

125

-16%

2%

Audit and other fees

11

8

11

38%

0%

Other

Non-lending losses, frauds and forgeries

35

25

27

40%

30%

Professional fees

142

137

102

4%

39%

Travel and entertainment expenses

100

100

93

0%

8%

Amortisation and impairment of other intangible assets

44

73

45

-40%

-2%

Freight, stationery, postage and telephone

127

138

135

-8%

-6%

Other

125

98

135

28%

-7%

712

732

673

-3%

6%

4,593

4,474

4,286

3%

7%

Total other expenses
Total operating expenses

102

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Income tax expense
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense charged in the Income Statement
Movement

Half Year

Profit before income tax

Mar 15$M
5,143

Sep 14$M
5,587

Mar 14$M
4,721

Mar 15v. Sep 14-8%

Mar 15v. Mar 14
9%

Prima facie income tax expense at 30%

1,543

1,676

1,416

-8%

9%

Tax effect of permanent differences:
Overseas tax rate differential

(55)

(37)

(59)

49%

-7%

Rebateable and non-assessable dividends

(1)

(1)

(1)

0%

0%

Profit from associates

27%

(94)

(81)

(74)

16%

Sale of ANZ Trustees and SSI

-

(11)

-

-100%

n/a

Offshore Banking Unit

-

6

(1)

-100%

-100%

Global Wealth - Policyholder income and contributions tax

194

149

21

30%

large

Tax provisions no longer required

(17)

(25)

(25)

-32%

-32%

Interest on Convertible Instruments

37

39

32

-5%

16%

Other

22

(14)

14

large

57%

1,629

1,701

1,323

-4%

23%

-

1

-

-100%

n/a

Total income tax expense charged
in the income statement

1,629

1,702

1,323

-4%

23%

Australia

1,172

1,251

885

-6%

32%

Overseas

457

451

438

1%

4%

1,629

1,702

1,323

-4%

23%

31.7%

30.5%

28.0%

Income tax under/(over) provided in previous years

Effective Tax Rate - Group103

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Dividends
Half Year

Movement

Mar 1586

Sep 14n/a

Mar 1483

Mar 15v. Sep 14
n/a

Mar 15v. Mar 14
4%

Final (fully franked)

n/a

95

n/a

n/a

n/a

Total

86

95

83

-9%

4%

-

2,278

-

n/a

n/a

2,619

-

2,497

n/a

5%

Dividend per ordinary share (cents)
Interim (fully franked)

Ordinary share dividend ($M)1
Interim dividend
Final dividend

(41)

(39)

(42)

5%

-2%

Total2

2,578

2,239

2,455

15%

5%

Ordinary share dividend payout ratio (%)3

67.9%

67.6%

67.2%

Bonus option plan adjustment

1.

2.
3.

Dividends paid to ordinary equity holders of the Company. Excludes dividends payable by subsidiaries of the Group to non-controlling equity holders of nil (Sep 14 half: nil, Mar 14 half: $1
million).
Dividends payable are not accrued and are recorded when paid.
Dividend payout ratio is calculated using proposed 2015 interim dividend of $2,379 million (not shown in the above table). The proposed 2015 interim dividend of $2,379 million is basedon the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September 2014 half and March 2014 half are calculated using actual
dividend paid of $2,619 million and $2,278 million respectively. Dividend payout ratio is calculated by adjusting profit attributable to shareholders of the Company by the amount ofpreference share dividends paid.

Ordinary Shares
The Directors propose that an interim dividend of 86 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2015. The proposed 2015
interim dividend will be fully franked for Australian tax purposes, and New Zealand imputation credits of NZD 10 cents per ordinary share will also be
attached.
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2015 interim dividend. For the2015 interim dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares. The “Acquisition Price” to be used indetermining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume
weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX during the ten trading days
commencing on 15 May 2015 (less a 1.5% discount), and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank
equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their
participation in the DRP or BOP for the 2015 interim dividend must be received by ANZ's Share Registrar by 5.00pm (Australian Eastern Standard Time)on 13 May 2015.
Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United
Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at
an exchange rate calculated on 15 May 2015.

Preference Shares
Half Year

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Preference share dividend ($M)
Euro Trust Securities1

1

3

3

-67%

-67%

Dividend per preference share
Euro Trust Securities1€ 1.88€ 4.72€ 4.60

-60%

-59%

1.

The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014.

104

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings per share

1

Half Year

Number of fully paid ordinary shares on issue (M)2

Basic
Profit attributable to shareholders of the Company ($M)
Less Preference share dividends ($M)
Profit less preference share dividends ($M)
3

Weighted average number of ordinary shares (M)Basic earnings per share (cents)

DilutedProfit less preference share dividends ($M)
Interest on US Trust Securities ($M)

4

Movement

Mar 15

Sep 14

Mar 14

Mar 15v. Sep 14

Mar 15v. Mar 14

2,766.0

2,756.6

2,744.1

0%

1%

3,506

3,879

3,392

-10%

3%

(1)

(3)

(3)

-67%

-67%

3,505

3,876

3,389

-10%

3%

2,737.3

2,724.2

2,715.2

0%

1%

128.0

142.3

124.8

-10%

3%

3,505

3,876

3,389

-10%

3%

-

-

7

n/a

-100%

Interest on ANZ Convertible Preference Shares ($M)5

67

70

85

-4%

-21%

Interest on ANZ Capital Notes ($M)6

60

57

24

5%

large

-

-

-

n/a

n/a

3,632

4,003

3,505

-9%

4%

2,737.3

2,724.2

2,715.2

0%

1%

6.2

5.5

5.0

13%

24%

Interest on ANZ NZ Capital Notes ($M)7
Profit less preference share dividends and interest on US Trust Securities, ANZ Convertible
Preference Shares, ANZ Capital Notes and ANZ NZ Capital Notes ($M)
Weighted average number of shares on issue (M)3
Weighted average number of convertible options (M)Weighted average number of convertible US Trust Securities (M)4

-

-

16.8

n/a

-100%

Weighted average number of ANZ Convertible Preference Shares (M)5

91.2

113.8

134.5

-20%

-32%

Weighted average number of convertible ANZ Capital Notes (M)6

79.3

89.2

34.5

-11%

large

Weighted average number of convertible ANZ NZ Capital Notes (M)7Adjusted weighted average number of shares - diluted (M)Diluted earnings per share (cents)
1.

2.

3.

4.

5.

6.

7.

0.1

-

-

n/a

n/a

2,914.1

2,932.7

2,906.0

-1%

0%

124.6

136.5

120.6

-9%

3%

The earnings per share calculation excludes the Euro Trust Securities (preference shares). The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15
December 2014.
Number of fully paid ordinary shares on issue includes Treasury shares of 24.6 million at 31 March 2015 (Sep 14: 25.6 million; Mar 14: 26.9 million), comprised of 11.5 million in ANZEST
Pty Ltd (Sep 14: 13.8 million; Mar 14: 14.3 million) and 13.1 million Treasury shares held in Global Wealth (Sep 14: 11.8 million; Mar 14: 12.6 million).
Weighted average number of ordinary shares excludes 12.3 million weighted average number of ordinary Treasury shares held in ANZEST Pty Ltd (Sep 14: 14.5 million; Mar 14: 15.0
million) for the group employee share acquisition scheme and 12.7 million weighted average number of ordinary Treasury shares held in Global Wealth (Sep 14: 12.5 million; Mar 14: 12.8
million).
The US Trust Securities (issued on 27 November 2003) were due to convert to ANZ ordinary shares in 2053 at the market price of ANZ ordinary shares less 5% unless redeemed orbought back prior to that date. The US Trust Securities were redeemed by ANZ for cash at face value on 16 December 2013.
There are three “tranches” of convertible preference shares. The first were convertible preference shares (CPS1) issued on 30 September 2008 which were convertible to ANZ ordinary
shares on 16 June 2014 (unless redeemed prior to that date) at the market price of ANZ ordinary shares less 2.5%. On 31 March 2014, 6.3 million CPS1 were cancelled and re-invested in
ANZ Capital Notes 2 (CN2) issued on that date and on 16 June 2014, 4.5 million CPS1 were redeemed by ANZ for cash at face value. The second are convertible preference shares(CPS2) issued on 17 December 2009 that convert to ordinary shares on 15 December 2016 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion
conditions). The third are convertible preference shares (CPS3) issued on 28 September 2011 that convert to ordinary shares on 1 September 2019 at the market price of ANZ ordinary
shares less 1.0% (subject to certain conversion conditions).
There are three “tranches” of ANZ Capital Notes. The first are ANZ Capital Notes 1 (CN1) issued on 7 August 2013 which convert to ANZ ordinary shares on 1 September 2023 at themarket price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The second are ANZ Capital Notes 2 (CN2) issued on 31 March 2014 which convert to ANZ
ordinary shares on 24 March 2024 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions). The third are ANZ Capital Notes 3 (CN3) issued on 5
March 2015 which convert to ANZ ordinary shares on 24 March 2025 at the market price of ANZ ordinary shares less 1.0% (subject to certain conversion conditions).
ANZ Bank New Zealand Limited issued ANZ NZ Capital Notes on 31 March 2015 which convert to ANZ ordinary shares on 25 May 2022 at the market price of ANZ ordinary shares less
1.0% (subject to certain conversion conditions).

105

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Net loans and advances

As at

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Overdrafts

5,998

6,199

5,756

-3%

4%

Credit card outstandings

9,134

8,791

8,852

4%

3%

Mar 15v. Mar 14

Australia

Commercial bills outstanding

10,859

11,684

12,224-7%-11%

Term loans - housing

217,756

209,122

201,396

4%

8%

Term loans - non-housing

118,027

111,902106,967

5%

10%

Lease receivables

1,345

1,481

1,563

-9%

-14%

Hire purchase

1,293

1,492

1,764

-13%

-27%

489

56

490

large

0%

364,901

350,727

339,012

4%

8%

Other

Asia Pacific, Europe & America
Overdrafts

1,643

1,312

1,456

25%

13%

Credit card outstandings

1,370

1,241

1,135

10%

21%

Commercial bills outstanding

3,286

3,343

2,431

-2%

35%

Term loans - housing

7,430

6,639

6,063

12%

23%

Term loans - non-housing

14%

74,041

66,106

65,115

12%

Lease receivables

222

177

140

25%

59%

Other

31

264

121

-88%

-74%

88,02379,082

76,461

11%

15%

Overdrafts

1,147

1,118

1,221

3%

-6%

Credit card outstandings

1,609

1,408

1,430

14%

13%

Term loans - housing

63,311

55,62757,254

14%

11%

Term loans - non-housing

40,25935,31635,790

14%

12%

New Zealand

Lease receivables

250

247

295

1%

-15%

Hire purchase

862

746

720

16%

20%

Other

123

112

117

10%

5%

107,561

94,57496,82714%

11%560,485

524,383

512,300

7%

9%

Subtotal

Unearned income

(803)

(892)

(922)

-10%

-13%

Capitalised brokerage/mortgage origination fees1

1,127

1,043

1,000

8%

13%

Customers' liabilities for acceptances

1,422

1,151

1,185

24%

20%

Total gross loans and advances

562,231525,685

513,5637%

9%(4,028)(3,933)(4,313)2%-7%558,203521,752

509,2507%

10%Provision for credit impairment (refer Note 8)
Total net loans and advances
1.

Capitalised brokerage/mortgage origination fees are amortised over the expected life of the loan.

106

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Provision for credit impairment
Half Year

Collective provision
Balance at start of period
Charge/(release) to income statement
Adjustment for exchange rate fluctuations
Total collective provision1

Movement

Mar 15$M
2,757

Sep 14$M
2,843

Mar 14$M
2,887

Mar 15v. Sep 14-3%

Mar 15v. Mar 14
-5%

55

(81)

(74)

large

large

102

(5)

30

large

large

2,914

2,757

2,843

6%

2%

Individual provision
Balance at start of period

1,176

1,470

1,467

-20%

-20%

New and increased provisions

806

846

966

-5%

-17%

Write-backs

(260)

(190)

(257)

37%

1%

33

(4)

12

large

large

Adjustment for exchange rate fluctuations
Discount unwind

(32)

(35)

(30)

-9%

7%

Bad debts written-off

(609)

(911)

(688)

-33%

-11%

Total individual provision

1,114

1,176

1,470

-5%

-24%

Total provision for credit impairment

4,028

3,933

4,313

2%

-7%

1.

The collective provision includes amounts for off-balance sheet credit exposures of $646 million at 31 March 2015 (Sep 14: $613 million; Mar 14: $597 million). The impact on the income
statement for the half year ended 31 March 2015 was a $7 million charge (Sep 14 half: $9 million charge; Mar 14 half: $8 million release).

Half Year

Movement

Provision movement analysis

Mar 15$M

Sep 14$M

Mar 14$M

New and increased provisions
Australia

587

604

Asia Pacific, Europe & America

116

94

New Zealand

103

148

806

846

Write-backs

(260)

(190)

546

656

709

Mar 15v. Sep 14

Mar 15v. Mar 14

688

-3%

-15%

152

23%

-24%

126

-30%

-18%

966

-5%

-17%

(257)

37%

1%

-17%

-23%

Recoveries of amounts previously written-off

(107)

(116)

(108)

-8%

-1%

Individual credit impairment charge

439

540

601

-19%

-27%

Collective credit impairment charge/(release)

55

(81)

(74)

large

large

Credit impairment charge

494

459

527

8%

-6%

Half Year

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Australia

698

740

941

-6%

-26%

Asia Pacific, Europe & America

219

236

296

-7%

-26%

New Zealand

197

200

233

-2%

-15%

1,114

1,176

1,470

-5%

-24%

Individual provision balance

Total individual provisionCollective provision balance
Australia

1,882

1,829

1,887

3%

0%

Asia Pacific, Europe & America

582

515

492

13%

18%

New Zealand

450

413

464

9%

-3%

2,914

2,757

2,843

6%

2%

Total collective provision107

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Credit quality
Financial Assets maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances, there may bedifferences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these differences
arise in respect of financial assets that are subject to risks other than credit risk, such as equity investments which are primarily subject to market risk, orbank notes and coins. For contingent exposures, the maximum exposure to credit risk is the maximum amount the Group would have to pay if the
instrument is called upon. For undrawn facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
The following tables present the maximum exposure to credit risk of on-balance sheet and off-balance sheet financial assets before taking account of any
collateral held or other credit enhancements.
As at
Mar 15$M
558,203

Maximum exposure to credit risk
Net loans and advances1

Movement

Sep 14$M
521,752

Mar 14$M
509,250

Mar 15v. Sep 14
7%

Mar 15v. Mar 14
10%

Other financial assets2

246,131

198,751

182,141

24%

35%

On-balance sheet sub total

804,334

720,503691,39112%16%

Undrawn facilities

213,303

193,984

177,386

10%

20%

Contingent facilities

41,01840,07539,2682%

4%

Off-balance sheet sub total

254,321234,059

216,654

9%

17%

Total exposure to credit risk

1,058,655

954,562

908,045

11%

17%

1.
2.

Includes individual and collective provisions for credit impairment held in respect of credit related commitments.
Certain other financial assets totalling $38.2 billion (Sep 14 half: $35.1 billion; Mar 14 half: $34.7 billion) have been excluded. These are comprised of bank notes and coins within cash,
equity instruments within available-for-sale financial assets and investments relating to the insurance business where the credit risk is passed onto the policy holder.

Distribution of financial assets by credit quality
Net loans and advances1

Other financial assets

Credit related commitments2

As at

As at

As at

Neither past due nor impaired

Mar 15$M543,280

Sep 14$M
508,540

Mar 14$M
494,860

Mar 15$M
246,104

Sep 14$M
198,714

Mar 14$M
182,083

Mar 15$M
253,606

Sep 14$M
233,343

Mar 14$M
215,869

Past due but not impaired-

14,071

12,252

13,083

-

-

-

-

-

Restructured

146

67

60

-

-

-

-

-

-

Net impaired

1,385

1,552

1,918

27

37

58

36

57

114

558,882

522,411509,921

246,131

198,751

182,141

253,642

233,400

215,983

Total
1.
2.

Individual and collective provisions for credit impairment held in respect of credit related commitments have been reallocated to credit related commitments in this table.
Comprises undrawn commitments and customer contingent liabilities net of collective and individual provisions.

Credit quality of financial assets neither past due nor impaired
The credit quality of financial assets is managed by the Group using internal customer credit ratings (CCRs) based on their current probability of default.
The Group’s masterscales are mapped to external rating agency scales, to enable wider comparisons.
Net loans and advances

Other financial assets

Credit related commitments4

As at

As at

As at

Strong credit profile1

Mar 15$M
412,909

Sep 14$M385,487

Mar 14$M
377,153

Mar 15$M
241,170

Sep 14$M
194,190

Mar 14$M
177,817

Mar 15$M
211,380

Sep 14$M
196,558

Mar 14$M
183,807

Satisfactory risk2

112,049

105,625

101,346

4,574

4,097

3,935

39,77334,42529,851Sub-standard but not past due or
impaired3

18,322

17,42816,361

360

427

331

2,453

2,360

2,211

Total

543,280

508,540

494,860

246,104

198,714

182,083

253,606

233,343

215,869

1.

2.

3.

4.

Customers that have demonstrated superior stability in their operating and financial performance over the long-term, and whose debt servicing capacity is not significantly vulnerable toforeseeable events. This rating broadly corresponds to ratings “Aaa” to “Baa3” and “AAA” to “BBB-” of Moody’s and Standard & Poor’s respectively.
Customers that have consistently demonstrated sound operational and financial stability over the medium to long term, even though some may be susceptible to cyclical trends orvariability in earnings. This rating broadly corresponds to ratings “Ba2” to “Ba3” and “BB” to “BB-” of Moody’s and Standard & Poor’s respectively.
Customers that have demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly
medium term. This rating broadly corresponds to ratings “B1” to “Caa” and “B+” to “CCC” of Moody’s and Standard & Poor’s respectively.
Comprises undrawn commitments and customer contingent liabilities net of collective provisions.

108

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Credit quality, cont’dAgeing analysis of financial assets that are past due but not impaired
Ageing analysis of past due loans is used by the Group to measure and manage emerging credit risks. Financial assets that are past due but not
impaired include those which are assessed, approved and managed on a portfolio basis within a centralised environment (for example credit cards andpersonal loans) that can be held on a productive basis until they are 180 days past due, as well as those which are managed on an individual basis.
A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the value of associated security is sufficient
to cover amounts outstanding.

As at

Movement

Ageing analysis of net loans and advancesthat are past due but not impaired1
1-5 days

Mar 15$M
3,323

Sep 14$M
3,082

Mar 14$M
3,345

Mar 15v. Sep 14
8%

Mar 15v. Mar 14-1%

6-29 days

5,271

4,559

4,660

16%

13%

30-59 days

2,069

1,624

2,037

27%

2%
18%

60-89 days

1,160

1,005

980

15%

>90 days

2,248

1,982

2,061

13%

9%

Total

14,071

12,252

13,083

15%

8%

1.

A policy change was implemented during the half whereby the Group changed the criteria for including past due loans attributable to hardship in the ageing analysis. Comparative
information has not been restated.

Financial assets that are individually impaired
ANZ regularly reviews its portfolio and monitors adherence to contractual terms. When doubt arises as to the collectability of a credit facility, the financial
instrument (or ‘the facility’) is classified and reported as individually impaired and an individual provision is allocated against it.
As described in the summary of significant accounting policies in the 2014 Annual Financial Statements, impairment provisions are created for financial
instruments that are reported on the balance sheet at amortised cost. For instruments reported at fair value, impairment provisions are treated as part ofoverall change in fair value and directly reduce the reported carrying amounts.
Impaired instruments

Individual provision balances

As at

As at

Derivative financial instruments1

Mar 15$M
27

Sep 14$M
37

Mar 14$M
58

Mar 15$M-

Sep 14$M-

Mar 14$M-

Net loans and advances

2,466

2,682

3,314

(1,081)(1,130)(1,396)

69

103

188

(33)

(46)

(74)

2,562

2,822

3,560

(1,114)(1,176)(1,470)Credit related commitments2
Total
1.
2.

Derivative financial instruments are net of credit valuation adjustments.
Comprises undrawn commitments and customer contingent liabilities.

As at

Movement

Mar 15$M
1,903

Sep 14$M
1,896

Mar 14$M
2,204

Mar 15v. Sep 14
0%

Mar 15v. Mar 14-14%$10 million to $100 million

607

683

897

-11%

-32%

Greater than $100 million

198

310

519

-36%

-62%

Less than $10 million

Gross impaired assets

1

2,708

2,889

3,620

-6%

-25%

Less: Individual provision for credit impairment(1,114)(1,176)(1,470)-5%-24%

Net impaired assets

1,594

1,713

2,150

-7%

-26%

1.

Includes $146 million restructured items (Sep 14: $67 million; Mar 14: $60 million).

109

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Deposits and other borrowings

As at

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Australia
Certificates of deposit

55,85749,446

51,217

13%

9%

Term deposits

69,59578,77977,900-12%-11%

Other deposits bearing interest and other borrowings

151,436

142,244

132,331

6%

14%

Mar 15v. Sep 14

Mar 15v. Mar 14

Deposits not bearing interest

7,133

6,845

6,157

4%

16%

Deposits from banks

19,761

15,613

13,617

27%

45%

Commercial paper

11,446

6,237

8,812

84%

30%

1

1

1

0%

0%

315,229299,165

290,035

5%

9%

-53%

Borrowing corporations' debt

Asia Pacific, Europe & America
2,354

2,083

4,986

13%

Term deposits

Certificates of deposit

101,087

82,956

79,58622%

27%

Other deposits bearing interest and other borrowings

24,531

20,885

19,07717%

29%

Deposits not bearing interest

4,684

4,211

3,990

11%

17%

Deposits from banks

27,71622,54022,44923%

23%

Commercial paper

5,125

3,516

2,166

46%

large

165,497

136,191

132,254

22%

25%

-5%

New ZealandCertificates of deposit

1,435

1,226

1,504

17%

Term deposits

34,211

30,981

32,686

10%

5%Other deposits bearing interest and other borrowings

36,89630,33029,84122%

24%

Deposits not bearing interest

6,148

5,348

5,468

15%

12%

Deposits from banks

43

40

30

8%

43%

Commercial paper

6,157

5,399

5,063

14%

22%

Borrowing corporations' debt

1,599

1,399

1,437

14%

11%

86,48974,72376,02916%

14%567,215510,079

498,318

11%

14%

Total Deposits and other borrowings

110

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Subordinated debt
Half Year
Mar 15$M

Movement

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Additional Tier 1 Capital1
Convertible Preference Shares (ANZ CPS)ANZ CPS12

-

-

454

n/a

-100%

ANZ CPS23

1,969

1,967

1,965

0%

0%

4

1,335

1,333

1,331

0%

0%

ANZ CN15

1,110

1,109

1,107

0%

0%

ANZ CN26

1,597

1,595

1,593

0%

0%

ANZ CN37

958

-

-

n/a

n/a

484

-

-

n/a

n/a

Perpetual subordinated notes

1,211

1,087

1,108

11%

9%

Subordinated notes

7,799

6,516

5,668

20%

38%

Total subordinated debt

16,463

13,607

13,22621%

24%

ANZ CPS3

ANZ Capital Notes (ANZ CN)

ANZ NZ Capital Notes8
9Tier 2 Capital

1.
2.

3.

4.

5.

6.

7.

8.

9.

ANZ Capital Notes and the ANZ NZ Capital Notes are Basel III compliant. APRA has granted transitional capital treatment for ANZ CPS2 and CPS3 until their first conversion date.
On 30 September 2008, ANZ issued convertible preference shares (CPS1). $627 million CPS1 were reinvested in ANZ Capital Notes 2 (CN2) on 31 March 2014 and the remaining $454
million CPS1 were bought back and cancelled on 16 June 2014.
On 17 December 2009, ANZ issued convertible preference shares (CPS2) which will convert into ANZ ordinary shares on 15 December 2016 at a 1% discount (subject to certain
conditions being satisfied).
On 28 September 2011, ANZ issued convertible preference shares (CPS3) which will convert into ANZ ordinary shares on 1 September 2019 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125% then the convertible preference shares will immediately convert into ANZ ordinary
shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on and from 1 September 2017 the convertible preference shares are redeemable orconvertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 7 August 2013, ANZ issued convertible notes (ANZ Capital Notes 1 or CN1) which will convert into ANZ ordinary shares on 1 September 2023 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will
immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 1 September 2021 the notes are redeemable orconvertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 31 March 2014, ANZ issued convertible notes (ANZ Capital Notes 2 or CN2) which will convert into ANZ ordinary shares on 24 March 2024 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will
immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 24 March 2022 the notes are redeemable orconvertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 5 March 2015, ANZ issued convertible notes (ANZ Capital Notes 3 or CN3) which will convert into ANZ ordinary shares on 24 March 2025 at a 1% discount (subject to certain
conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will
immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 24 March 2023 the notes are redeemable orconvertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ.
On 31 March 2015, ANZ Bank New Zealand Limited (ANZ Bank NZ) issued convertible notes (ANZ NZ Capital Notes) which will convert into ANZ ordinary shares on 25 May 2022 at a 1%
discount (subject to certain conditions being satisfied). If ANZ or ANZ Bank NZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, ANZ receives a notice of non-viability
from APRA, ANZ Bank NZ receives a direction from RBNZ or a statutory manager is appointed to ANZ Bank NZ and makes a determination, then the notes will immediately convert into
ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 25 May 2020 the notes are redeemable or convertible into ANZ ordinary
shares (on similar terms to the mandatory conversion) by ANZ Bank NZ.
The convertible subordinated notes are Basel III compliant. APRA has granted transitional capital treatment for all other outstanding subordinated notes until their first call date or, in thecase of the perpetual subordinated notes the earlier of the end of the transitional period (January 2021) and the first call date when a step-up event occurs. If ANZ receives a notice of nonviability from APRA, then the convertible subordinated notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number.

111

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. Share capital
Half Year

Issued and quoted securities
Ordinary shares

Mar 15No.

Sep 14
No.

Mar 14
No.

Closing balance

2,765,980,222

2,756,627,771

2,744,118,670

9,352,451

12,509,101

16,352,516--

15,889,156

Issued during the half year
Bought back during the half year

13. Shareholders’ equity
Half Year

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

24,902

24,40024,512

2%

2%

-46%

Share capital
Balance at start of period
Ordinary share capital movements
Dividend reinvestment plan

257

375

476

-31%

Group employee share acquisition scheme1

(97)

99

(88)

large

10%

Treasury shares in Global Wealth2

(39)

26

(2)

large

large

Group share option scheme

-

2

2

-100%

-100%

Group share buyback

-

-

(500)

n/a

-100%

Preference share capital movements
Preference shares bought back3
Total share capital

(871)

-

-

n/a

n/a

24,152

24,902

24,400

-3%

-1%

(605)

(566)

(1,125)

7%

-46%
-100%

Foreign currency translation reserve
Balance at start of period

-

48

(11)

-100%

Currency translation adjustments net of hedges

2,174

(87)

570

large

large

Total foreign currency translation reserve

1,569

(605)

(566)

large

large

Balance at start of period

60

52

55

15%

9%

Share based payments/(exercises)

7

8

5

-13%

40%

Transfer to the income statement

Share option reserve4

Transfer of options/rights lapsed to retained earnings

(7)

-

(8)

n/a

-13%

Total share option reserve

60

60

52

0%

15%

1.

2.

3.
4.

As at 31 March 2015, there were 11.5 million ANZEST Treasury shares outstanding (Sep 14: 13.8 million, Mar 14: 14.3 million). Shares in the Company which are purchased on-market by
ANZEST Pty Ltd (trustee of ANZ employee share and option plans) or issued by the Company to ANZEST Pty Ltd are classified as Treasury shares (to the extent that they relate tounvested employee share-based awards).
As at 31 March 2015, there were 13.1 million Global Wealth Treasury shares outstanding (Sep 14: 11.8 million, Mar 14: 12.6 million). Global Wealth purchases and holds shares in the
Company to back policy liabilities. These shares are classified as Treasury shares.
All 500,000 Euro Trust Securities on issue were bought back by ANZ for cash at face value (€1,000 per security) and cancelled on 15 December 2014.
The share option reserve arises on the grant of share options/deferred share rights/performance rights (“options and rights”) to selected employees under the ANZ Share Option Plan.
Amounts are transferred from the share option reserve to other equity accounts when the options and rights are exercised and to retained earnings when lapsed or forfeited after vesting.
Forfeited options and rights due to termination prior to vesting are credited to the income statement.

112

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. Shareholders’ equity, cont’d
Half Year

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Balance at start of period

160

151

121

6%

32%

Gain /(loss) recognised

132

7

62

large

large

Transferred to income statement

(35)

2

(32)

large

9%

Total available-for-sale revaluation reserve

257

160

151

61%

70%

large

Available-for-sale revaluation reserve

5

Cash flow hedge reserve6
Balance at start of period

169

62

75

large

Gain /(loss) recognised

164

117

-

40%

n/a

(8)

(10)

(13)

-20%

-38%

325

169

62

92%

large

(23)

(33)

(33)

-30%

-30%

-

10

-

-100%

n/a

(23)

(23)

(33)

0%

-30%

2,188

(239)

(334)

large

large

Balance at start of period

24,54422,90521,936

7%

12%

Profit attributable to shareholders of the Company

3,506

3,879

3,392

-10%

3%

7

-

8

n/a

-13%

28,057

26,78425,3365%

11%

Remeasurement gain/(loss) on defined benefit plans

1

6

26

-83%

-96%

Fair value gain/(loss) attributable to changes in
own credit risk of financial liabilities designated at fair value

9

(14)

(11)

large

large

(2,578)(2,239)(2,455)

15%

5%

12

10

12

20%

0%

(1)

(3)

(3)

-67%

-67%

Transferred to income statement
Total hedging reserve

Transactions with non-controlling interests reserve
Balance at start of period
Transfer to the income statement
Total transactions with non-controlling interests reserve
Total reserves

Retained earnings

Transfer of options/rights lapsed from share option reserve
Total available for appropriation

Ordinary share dividend paid
Dividend income on Treasury shares held within theGroup's life insurance statutory funds
Preference share dividend paid
7

Foreign exchange gains on preference shares bought back

116

-

-

n/a

n/a

Retained earnings at end of period

25,61624,54422,905

4%

12%

Share capital and reserves attributable toshareholders of the Company

51,95649,207

46,971

6%

11%

95

77

67

23%

42%

52,05149,28447,0386%

11%

Non-controlling interests
Total shareholders' equity
5.

6.

7.

The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold or impaired, that portion of the reserve
which relates to that financial asset is recognised in the income statement.
The cash flow hedge reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge isrecognised in the income statement when the hedged transaction impacts profit or loss.
The Euro Trust Securities were bought back by ANZ for cash at face value and cancelled on 15 December 2014. The foreign exchange gain between the issue date and 15 December
2014 was recognised directly in retained earnings.

113

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. Fair Value Measurement
A significant number of financial instruments are carried on the balance sheet at fair value. The following disclosures set out the Group’s fair value
measurements, the various levels within which fair value measurements are categorised, and the valuation methodologies and techniques used. The fairvalue disclosure does not cover those instruments that are not considered financial instruments from an accounting perspective, such as intangible
assets.
(i) Financial assets and financial liabilities not measured at fair value
The table below reflects the carrying amounts of financial instruments not measured at fair value on the Group’s balance sheet and where the carrying
amount is not considered a close approximation of fair value. The table also provides comparison of the carrying amount of these financial instruments to
the Group’s estimate of their fair value.

Carrying amount in the balance sheet

As at March 2015

Fair ValueAt amortisedcost$M

At fair
value
$M

Total
$M

557,508695

558,203559,400

557,508695

558,203559,400

Deposits and other borrowings

560,937

6,278

567,215567,7111

Debt issuances

82,1633,501

85,664

86,405Subordinated debt1

16,463-

16,463

16,657

659,563

9,779

669,342

670,773

Financial assets
Net loans and advances1

Financial liabilities

Carrying amount in the balance sheet

As at September 2014

At amortised
cost$M

Fair Value

At fair
value
$M

Total
$M

Financial assets
Net loans and advances1

521,384368

521,752

522,252

521,384368

521,752

522,252

Financial liabilities
Deposits and other borrowings

504,585

5,494

510,079

510,254

Debt issuances1

76,655

3,441

80,096

81,155Subordinated debt1

13,607-

13,607

13,764594,847

8,935

603,782

605,173

Carrying amount in the balance sheet

As at March 2014

At amortised
cost$M

Fair Value

At fair
value
$M

Total
$M

Financial assets
Net loans and advances1

509,012238

509,250

509,536

509,012238

509,250

509,536

Financial liabilities
Deposits and other borrowings

493,255

5,063

498,318

498,423

Debt issuances1

70,871

2,681

73,55274,506

Subordinated debt1

13,226-

13,226

13,424577,352

7,744

585,096586,353

1.

Fair value hedging is applied to certain financial instruments within the amortised cost categories. The resulting fair value adjustments mean that the carrying value differs from theamortised cost.

114

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(ii) Financial assets and financial liabilities measured at fair value in the balance sheet(a) Valuation methodologies
ANZ has an established control framework that ensures fair value is either determined or validated by a function independent of the party that undertakes
the transaction. The control framework ensures that all models are calibrated periodically to test that outputs reflect prices from observable current market
transactions in the same instrument or other available observable market data.
Where quoted market prices are used, prices are independently verified from other sources. For fair values determined using a valuation model, thecontrol framework may include, as applicable, independent development or validation of valuation models, any inputs to those models, any adjustments
required outside of the valuation model and, where possible, independent validation of model outputs. In this way, continued appropriateness of thevaluations is ensured.
In instances where the Group holds offsetting risk positions, the Group uses the portfolio exemption in AASB 13 to measure the fair value of such groupsof financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (that is, an asset) for a particular risk
exposure or to transfer a net short position (that is, a liability) for a particular risk exposure.
The Group categorises its fair value measurements on the basis of inputs used in measuring fair value using the fair value hierarchy below:Level 1 – Financial instruments that have been valued by reference to unadjusted quoted prices in active markets for identical financial instruments.
This category includes financial instruments valued using quoted yields where available for specific debt securities.



Level 2 – Financial instruments that have been valued through valuation techniques incorporating inputs other than quoted prices within Level 1 thatare observable for a similar financial asset or liability, either directly or indirectly.

Level 3 – Financial instruments that have been valued using valuation techniques which incorporate significant inputs that are not based on
observable market data (unobservable inputs).

(b) Valuation techniques and inputs used
In the event that there is no quoted market price for the instrument, fair value is based on valuation techniques. The valuation models incorporate theimpact of bid/ask spreads, counterparty credit spreads, funding costs and other factors that would influence the fair value determined by market
participants.
The majority of valuation techniques employ only observable market data. However, for certain financial instruments the valuation technique may employ
some data (valuation inputs or components) which is not readily observable in the current market. In these cases valuation inputs (or components of theoverall value) are derived and extrapolated from other relevant market data and tested against historic transactions and observed market trends. To theextent that valuation is based on models or inputs that are not observable in the market, the determination of fair value can be more subjective,
dependent on the significance of the unobservable input to the overall valuation.
The following valuation techniques have been applied to determine the fair values of financial instruments where there is no quoted price for the
instrument:

For instruments classified as Trading security assets and Securities short sold, Derivative financial assets and liabilities, Available-for-sale financial
assets, and Investments backing policy liabilities, fair value measurements are derived by using modelled valuations techniques (including
discounted cash flow models) that incorporate market prices/yields for securities with similar credit risk, maturity and yield characteristics; and/or
current market yields for similar instruments.



For Net loans and advances, Deposits and other borrowings and Debt issuances, discounted cash flow techniques are used where contractual future
cash flows of the instrument are discounted using discount rates incorporating wholesale market rates or market borrowing rates of debt with similar
maturities or a yield curve appropriate for the remaining term to maturity.



The fair value of External unit holder liabilities (life insurance funds) represents the unit holder’s share of net assets within the fund, which are carriedat fair value. The fair value of Policy liabilities being liabilities of the insurance business are directly linked to the performance and value of the assetsbacking the liabilities.

Further details of valuation techniques and significant unobservable inputs used in measuring fair values are described in (iii)(a) below.
There have been no substantial changes in the valuation techniques applied to different classes of financial instruments during the current half-year
period.

(c) Fair value measurements
The following table provides an analysis of financial instruments carried at fair value at reporting date categorised according to the lowest level input intoa valuation model or a valuation component that is significant to the reported fair value. The significance of the input is assessed against the reported fairvalue of the financial instrument and considers various factors specific to the financial instrument. The fair value has been allocated in full to the category
in the fair value hierarchy which most appropriately reflects the determination of the fair value.

115

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair value measurements

As at March 2015
Level 1
$M

Level 2
$M

Level 3
$M

Total
$M

Financial assets
Trading securities

48,091

3,295-

51,386

Derivative financial instruments

432

73,027

121

73,580Available-for-sale financial assets1

31,502

6,514

320

38,336

Investments backing policy liabilities

19,141

16,615739

36,495

-

695

-

695

99,166100,146

1,180

200,492

Payables and other liabilities2

3,905

158

-

4,063

Derivative financial instruments

Net loans and advances (designated at fair value)
Total
Financial liabilities

688

72,397

125

73,210

Deposits and other borrowings (designated at fair value)

-

6,278

-

6,278

Debt issuances (designated at fair value)

-

3,501

-

3,501

Policy liabilities3-

36,449-36,449External unit holder liabilities (life insurance funds)

-

3,489

-

3,489

4,593

122,272

125

126,990

Total

Fair value measurements

As at September 2014
Level 1
$M

Level 2
$M

Level 3
$M

Total
$M

Financial assets
Trading securities

45,857

3,835-

49,692Derivative financial instruments

472

55,791

106

56,369Available-for-sale financial assets

25,1475,730

40

30,917

Investments backing policy liabilities

18,85014,184545

33,579

-

368

-

368

90,326

79,908691

170,925

Payables and other liabilities2

3,851

19

-

3,870

Derivative financial instruments

Net loans and advances (designated at fair value)
Total
Financial liabilities

376

52,444105

52,925

Deposits and other borrowings (designated at fair value)

-

5,494

-

5,494

Debt issuances (designated at fair value)

-

3,441

-

3,441

Policy liabilities3-

34,038-34,038External unit holder liabilities (life insurance funds)

-

3,181

-

3,181

4,227

98,617

105

102,949

Total

Fair value measurements

As at March 2014
Level 1
$M

Level 2
$M

Level 3
$M

Total
$M

Financial assets
Trading securities

42,467

3,703-

46,170Derivative financial instruments

611

43,083135

43,829Available-for-sale financial assets

23,0994,195

36

27,330Investments backing policy liabilities

19,39013,721

86

33,197

-

238

-

238

85,56764,940257

150,764

Net loans and advances (designated at fair value)
Total
Financial liabilities
Payables and other liabilities2

3,212

76

-

3,288

Derivative financial instruments

636

45,098142

45,876
5,063

Deposits and other borrowings (designated at fair value)

-

5,063

-

Debt issuances (designated at fair value)

-

2,681

-

2,681

Policy liabilities3-

32,888-32,888External unit holder liabilities (life insurance funds)

-

3,334

-

3,334

3,848

89,140142

93,130

Total
1.

2.
3.

During the period $114 million of assets were transfers from Level 1 to Level 2 following a reassessment of available pricing information. During the period there were also transfers fromLevel 2 to Level 1 of $127 million following increased trading activity to support the quoted prices. Transfers into and out of Level 1 and Level 2 are deemed to have occurred as of the
beginning of the reporting period in which the transfer occurred.
Represents securities short sold.
Policy liabilities relate to life investment contract liabilities only as these are designated at fair value through profit and loss.

116

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(iii) Details of fair value measurements that incorporate unobservable market data(a)Composition of Level 3 fair value measurements

The following table presents the composition of financial instruments measured at fair value with significant unobservable inputs (Level 3 fair value
measurements).

As at March 2015

Financialliabilities

Financial assets

Available-forDerivatives
sale
$M
$M
1

Asset backed securities

Investmentsbacking policy
liabilities$M
191

Derivatives$M-

Illiquid corporate bonds

-

289

5

-

Structured credit products

59

-

-

(77)
-

Managed funds (suspended)

-

-

5

Alternative assets

-

30

538

-

Other derivatives

62

-

-

(48)

Total

121

320

739

(125)

As at September 2014

Financialliabilities

Financial assets

Available-forDerivatives
sale
$M
$M
1

Asset backed securities

Investmentsbacking policy
liabilities$M-

Derivatives$M-

Illiquid corporate bonds

-

12

-

-

Structured credit products

58

-

-

(80)
-

Managed funds (suspended)

-

-

12

Alternative assets

-

27

533

-

Other derivatives

48

-

-

(25)

Total

106

40

545

(105)

As at March 2014

Financialliabilities

Financial assets

Available-forDerivatives
sale
$M
$M
2

Asset backed securities

Investmentsbacking policy
liabilities$M
2

Derivatives$M-

Illiquid corporate bonds

-

8

-

-

Structured credit products

102

-

-

(127)

Managed funds (suspended)

-

-

23

-

Alternative assets

-

26

61

-

Other derivatives

33

-

-

(15)

Total

135

36

86

(142)

Structured credit products comprise the structured credit intermediation trades that the Group entered into from 2004 to 2007 whereby it sold protection
using credit default swaps over certain structures, and mitigated risk by purchasing protection via credit default swaps from US financial guarantors overthe same structures. These trades are valued using complex models with certain inputs relating to the reference assets and derivative counterparties not
being observable in the market. Such unobservable inputs include credit spreads and default probabilities contributing from 13% to 33% of the valuation.
The assets underlying the structured credit products are diverse instruments with a wide range of credit spreads and default probabilities relevant to thevaluation.
The remaining Level 3 balances include Asset backed securities and Illiquid corporate bonds where the effect on fair value of issuer credit cannot bedirectly or indirectly observed in the market; Managed funds (suspended) comprising of fixed income and mortgage investments in managed funds thatare illiquid and are not currently redeemable; Alternative assets that largely comprise investments in trusts which are illiquid and are not currently
redeemable, as well as various investments in unlisted equity securities for which no active market exists; and Other derivatives which include reverse
mortgage swaps where the mortality rate cannot be observed and long dated oil swaps where market data for the full tenor is unobservable.

117

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(b)

Movements in Level 3 fair value measurements

The following table sets out movements in Level 3 fair value measurements. Derivatives are categorised on a portfolio basis and classified as either financial assets
or financial liabilities based on whether the closing balance is an unrealised gain or loss. This could be different to the opening balance.

As at March 2015

Financial assets

Opening balance

Availablefor-sale$M
40

Derivatives$M
106

New purchases and issues

Financialliabilities
Investmentsbacking policy
liabilities$M
545

Derivatives
$M
(105)

-

4

241

(1)

Disposals (sales)

(8)

(6)

(293)

-

Cash settlements

-

-

-

5

Transfers into Level 3 category1

-

267

172

-

Transfers out of Level 3 category1

-

-

-

1

23

4

74

(25)

Transfers:

Fair value gain/(loss) recorded in other operating income in the income statement2
Fair value gain/(loss) recognised in reserves in equity
Closing balance

-

11

121

320

As at September 2014

739

Financialliabilities

Financial assets

Derivatives$M
135

Opening balance(125)

Availablefor-sale$M
36

Investmentsbacking policy
liabilities$M
86

Derivatives
$M
(142)
-

New purchases

-

-

447

Disposals (sales)

(9)

(8)

(19)

-

Cash settlements

-

-

-

18

Transfers into Level 3 category

14

7

-

(13)

Transfers out of Level 3 category

(1)

-

(2)

-

(33)

-

33

32

Transfers:

Fair value gain/(loss) recorded in other operating income in the income statement2
Fair value gain/(loss) recognised in reserves in equity
Closing balance

-

5

106

40

545

(105)

Financialliabilities

As at March 2014

Financial assets

Opening balance

Derivatives$M
200

Availablefor-sale$M
36

Investmentsbacking policy
liabilities$M
105

Derivatives
$M
(437)

-

4

-

-

Disposals (sales)

-

(4)

(15)

-

Cash settlements

-

-

-

1

New purchases

Transfers:
Transfers into Level 3 category
Transfers out of Level 3 category
Fair value gain/(loss) recorded in other operating income in the income statement2
Fair value gain/(loss) recognised in reserves in equity
Closing balance
1.

2.

-

1

-

-

(31)

-

-

254

(34)

-

(4)

40

-

(1)

135

36

86

(142)

There have been no significant transfers out of Level 3. The transfers into Level 3 relate principally to illiquid corporate bonds and asset backed securities where market activity has
reduced, resulting in pricing to no longer be considered observable. Transfers into and out of Level 3 are deemed to have occurred as of the beginning of the reporting period in which thetransfer occurred.
Relating to assets and liabilities that are held at the end of the period.

118

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(c)

Sensitivity to Level 3 data inputs

Where valuation techniques use assumptions with significant data inputs not being directly observable in the market place (Level 3 inputs), changing
these assumptions may change the resultant estimate of fair value. The majority of transactions in this category are ‘back-to-back’ in nature where ANZ
either acts as a financial intermediary or hedges the market risks. Similarly, the valuation of Investments backing policy liabilities directly impacts theassociated life investment contracts they relate to. In these circumstances, changes in the assumptions generally have minimal impact on the income
statement and net assets of ANZ. An exception to this is the ‘back-to-back’ structured credit intermediation trades which create significant exposure tocredit risk.
Principal inputs used in the determination of fair value of financial instruments included in the structured credit portfolio include counterparty credit
spreads, market-quoted CDS prices, recovery rates, default probabilities, correlation curves and other inputs, some of which may not be directly
observable in the market. The potential effect of changing prevailing unobservable inputs to reasonably possible alternative assumptions for valuing thosefinancial instruments could result in less than a (+/- ) $5 million impact on profit. The ranges of reasonably possible alternative assumptions are
established by application of professional judgement and analysis of the data available to support each assumption.
(d)Deferred fair value gains and losses

Where the fair value of a financial instrument at initial recognition is determined using unobservable data that is significant to the valuation of the
instrument, the difference between the transaction price and the amount determined based on the valuation technique (day one gain or loss) is not
immediately recognised in the income statement. Subsequently, the day one gain or loss is recognised in the income statement over the life of thetransaction on a straight line basis or over the period until all inputs become observable.
The table below summarises the aggregate amount of day-one gains not yet recognised in the income statement and amounts which have beensubsequently recognised.
Half Year
Mar 15$M
3

Sep 14$M
3

Deferral on new transactions

-

-

1

Amounts recognised in income statement during the period

(1)

-

(2)

Closing balance

2

3

3

Opening balance

Mar 14$M
4The closing balance of unrecognised gains predominantly relates to derivative financial instruments.

15. Segment analysis(i) Description of segments
The Group operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand, and Global Wealth being the major
operating divisions. The IIB and Global Wealth divisions are coordinated globally. GTSO and Group Centre provide support to the operating divisions,
including technology, operations, shared services, property, risk management, financial management, strategy, marketing, human resources andcorporate affairs. The Group Centre also includes Group Treasury and Shareholder Functions.
During the March 2015 half, the Merchant Services and Commercial Credit Cards businesses were transferred out of the Cards and Payments business
unit in Australia Retail and split between Australia C&CB and IIB based on customer ownership. Comparative information has been restated.
There have been no other major structure changes, however certain prior period comparatives have been restated to align with current period
presentation resulting from minor changes to customer segmentation and the realignment of support functions.
(ii) Operating segments
Transactions between business units across segments within ANZ are conducted on an arms length basis.
Half Year

Movement

Segment Revenue
Australia

Mar 15$M
4,241

Sep 14$M
4,192

Mar 14$M
4,001

Mar 15v. Sep 14
1%

Mar 15v. Mar 14
6%

International and Institutional Banking

3,786

3,483

3,622

9%

5%

New Zealand

1,344

1,277

1,243

5%

8%

Global Wealth

850

938

807

-9%

5%

GTSO and Group Centre

(36)

20

(5)

large

large

10,185

9,910

9,668

3%

5%

45

610

(134)

-93%

large

10,23010,520

9,534

-3%

7%

Subtotal
Other1
Group total
1.

In evaluating the performance of the operating segments, certain items are removed from the operating segment results where they are not considered integral to the ongoing
performance of the segment and are evaluated separately. These items are set out in part (iii) of this note (refer pages 85 to 92 for further analysis).

119

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Half Year

Movement

Segment Profit
Australia

Mar 15$M
1,602

Sep 14$M
1,571

Mar 14$M
1,483

Mar 15v. Sep 142%

Mar 15v. Mar 14
8%

International and Institutional Banking

7%

1,459

1,335

1,368

9%

New Zealand

566

528

550

7%

3%

Global Wealth

259

308

234

-16%

11%

GTSO and Group Centre

(210)

(140)

(120)

50%

75%

Subtotal

3,676

3,602

3,515

2%

5%

Other1

(170)

277

(123)

large

38%

Group total

3,506

3,879

3,392

-10%

3%

1.

In evaluating the performance of the operating segments, certain items are removed from the operating segment results where they are not considered integral to the ongoing
performance of the segment and are evaluated separately. These items are set out in part (iii) of this note (refer pages 85 to 92 for further analysis).

Half Year

Movement

Segment Assets
Australia

Mar 15$M
300,527

Sep 14$M
290,564

Mar 14$M
281,032

Mar 15v. Sep 14
3%

Mar 15v. Mar 14
7%

International and Institutional Banking

405,057

342,985

314,660

18%

29%

New Zealand

101,31089,44392,01013%

10%Global Wealth

53,92050,46949,803

7%

8%

(470)

(1,209)

585

-61%

large

860,344772,252

738,091

11%

17%

(257)

(160)

(276)

61%

-7%

860,087

772,092

737,815

11%

17%

GTSO and Group Centre
Subtotal
Other2
Group total
2.

In evaluating the performance of the operating segments, certain items are removed from the operating segment where they are not considered integral to the ongoing performance ofthe segment.

(iii) Other items
The table below sets out the profit after tax impact of other items.
Half Year
Mar 15$M
79

Sep 14$M(13)

Movement
Mar 14$M
37

Mar 15v. Sep 14
large

Mar 15v. Mar 14
large

(3)

large

large

78

-91%

large

Item gains/(losses)
Treasury shares adjustment

Related segment
Global Wealth

Revaluation of policy liabilities

Global Wealth

(67)

(23)

Economic hedging

IIB

(14)

(150)

Revenue and net investment hedges

GTSO and Group Centre

176

(119)

18

large

large

Structured credit intermediation trades

IIB

(4)

28

(7)

large

-43%

170

(277)

123

large

38%

Total profit after tax

120

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16. Note to the Cash Flow Statement(i) Reconciliation of profit after income tax to net cash provided by/(used in) operating activities
Half Year
Inflows(Outflows)

Inflows(Outflows)

Inflows(Outflows)

Mar 15$M

Sep 14$M

Mar 14
$M1

3,506

3,879

3,392

Provision for credit impairment

494

459

527

Depreciation and amortisation

473

429

410

(Profit)/loss on sale of businesses

-

(146)

-

(Profit)/loss on sale of premises and equipment

-

31

9

Profit after income tax
Adjustments to reconcile to net cash provided by/(used in) operating activities

Net derivatives/foreign exchange adjustment

9,684(1,496)239

Equity settled share-based payments expense2

(89)

105

(78)

Other non-cash movements

(300)

(202)

(299)
(4,990)Net (increase)/decrease in operating assets:
410(3,610)Collateral paid

Trading securities(4,505)875

396

Net loans and advances(16,726)(14,079)(21,075)

Investments backing policy liabilities(3,122)(564)(1,238)Interest receivable

(31)

(41)

(121)

Accrued income

(44)

45

(36)

Net tax assets

(20)

292

(474)

Net increase/(decrease) in operating liabilities:
Deposits and other borrowings

30,583

9,195

27,397

Settlement balances owed by ANZ(2,695)

1,982

(624)

Collateral received(1,364)

1,505

(70)

Life insurance contract policy liabilities

2,760

1,127

1,020

Payables and other liabilities

432

563

347

Interest payable

(55)

565

263

Accrued expenses

(32)

-

(136)

6

(3)

(127)

Total adjustments

15,859(2,968)1,340

Net cash provided by/(used in) operating activities

19,365911

4,732

Provisions including employee entitlements

1.

2.

During the second half of 2014, Net loans and advances with Financial Institution counterparties with original maturities of less than 90 days were removed from the definition of ‘cash
equivalents’ and now form part of the cash flows from net loans and advances in operating activities. The March 2014 comparatives have been adjusted to reflect this change (refer to note
48 of the 2014 ANZ Annual Financial Statements for further information).
The equity settled share-based payments expense is net of on-market share purchases of $197 million (Sep 14 half: nil; Mar 14 half: $188 million) used to satisfy the obligation.

(ii) Reconciliation of cash and cash equivalents
Cash and cash equivalents at the end of the period as shown in the Cash Flow Statement are reflected in the related items in the Balance Sheet as
follows:
As at
Mar 15$M

Sep 14$M

Mar 14$M

Cash

46,00432,55933,651

Settlement balances owed to ANZ

19,45815,67012,202

65,462

48,22945,853(iii) Non-cash financing and investing activities
Half Year

Share capital issues
Dividends satisfied by share issue
Dividends satisfied by bonus share issue

121

Inflows(Outflows)

Inflows(Outflows)

Inflows(Outflows)

Mar 15$M

Sep 14$M

Mar 14
$M

257

375

476

41

39

42

298

414

518

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

17. Changes in composition of the Group
There were no material entities acquired or disposed of during the half year ended 31 March 2015.

18. Investments in Associates
Half Year

Share of associates' profit

Contributions to profit1

P.T. Bank Pan Indonesia

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

314

270

247

16%

27%

Contribution toGroup profit after tax

Ownership interest
held by Group

Half Year

As at

Associates

Bank of Tianjin2

Movement

Mar 15$M
35

Sep 14$M
46

Mar 14$M
40

Mar 15%39

Sep 14%39

Mar 14
%
39

80

39

56

14

14

14

AMMB Holdings Berhad

77

88

67

24

24

24

Shanghai Rural Commercial Bank

106

74

68

20

20

20

Other associates

16

23

16

n/a

n/a

n/a

Share of associates' profit

314

270

247

1.

2.

Contributions to profit reflect the IFRS equivalent results adjusted to align with the Group’s financial year end which may differ from the published results of these entities. Excludes gains
or losses on disposal or valuation adjustments.
Significant influence was established via representation on the Board of Directors.

19. Contingent liabilities and contingent assets
There are outstanding court proceedings, claims and possible claims for and against the Group. Where relevant, expert legal advice has been obtained
and, in the light of such advice, provisions and/or disclosures as deemed appropriate have been made. In some instances we have not disclosed theestimated financial impact of the individual items either because it is not practicable to do so or because such disclosure may prejudice the interests of
the Group.
Refer to Note 43 of the 2014 ANZ Annual Financial Statements for a description of contingent liabilities and contingent assets as at 30 September 2014.
A summary of some of those contingent liabilities and a new contingent liability that has arisen in the current reporting period is set out below.
–

Bank fees litigation
Litigation funder IMF Bentham Limited commenced a class action against ANZ in 2010, followed by a second similar class action in March
2013. Together the class actions are claimed to be on behalf of more than 40,000 ANZ customers. The customers currently involved in theseclass actions are only part of ANZ’s customer base for credit cards and transaction accounts.
The applicants contended that the relevant exception fees (honour, dishonour and non-payment fees on transaction accounts and late payment
and overlimit fees on credit cards) were unenforceable penalties (at law and in equity) and that various of the fees were also unenforceable
under statutory provisions governing unconscionable conduct, unfair contract terms and unjust transactions.
On 8 April 2015, the Full Federal Court delivered judgment in respect of appeals by both parties in the second class action. The Full Federal
Court found in ANZ’s favour in respect of all fees subject to appeal (in relation to both the penalty and statutory claims). IMF Bentham Limited
has indicated that it intends to seek special leave to appeal the decision to the High Court of Australia. In the meantime, the first class action isin abeyance.
In August 2014, IMF Bentham Limited commenced a separate class action against ANZ for late payment fees charged to ANZ customers in
respect of commercial credit cards and other ANZ products (at this stage not specified). The action is expressed to apply to all relevant
customers, rather than being limited to those who have signed up with IMF Bentham Limited. The action is at an early stage and has been put
on hold.
In June 2013, litigation funder Litigation Lending Services (NZ) commenced a representative action against ANZ for certain fees charged to
New Zealand customers since 2007. There is a risk that further claims could emerge in Australia, New Zealand or elsewhere.

–

ASIC review of interbank BBSW rate trading
On 19 November 2014, ANZ announced that in light of an investigation by the Australian Securities and Investments Commission (ASIC) into
historic trading practices in the Australian interbank market known as the Bank Bill Swap Rate (BBSW) market, ANZ was taking the precautionof having seven staff involved in markets trading step down pending ANZ’s own internal review. Since mid-2012 ASIC has been undertaking
inquiries in relation to the BBSW rate process. ASIC's inquiries are ongoing and the range of potential outcomes from these inquiries include
civil and criminal penalties and other actions under the relevant legislation.

122

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS–

Security recovery actions
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets over recent years.
ANZ will defend these claims and any future claims.

There is a risk that contingent liabilities described in Note 43 of the 2014 ANZ Annual Financial Statements and above may be larger than anticipated orthat additional litigation or other contingent liabilities may arise.

20. Related party disclosure
There have been no significant changes to the arrangements with related parties.

21. Significant events since balance date
On 8 April 2015, the Full Federal Court delivered judgment in respect of appeals by both parties in the class action litigation brought by IMF Bentham
Limited in March 2013. Refer to Note 19 for further details.
On 4 May 2015, the Group announced its intention to sell the Esanda dealer finance business (representing approximately $8.3 billion in lending assets).
Other than the matters above, there have been no significant events from 31 March 2015 to the date of signing of this report.

123

DIR
RECTORS’ DE
ECLARATION AND RESPONNSIBILITY STAATEMENT

Directors’ DeclarattionThe
e Directors of Australia and New Zealand Banking
g Group Limited declare that:1.

2.

ondensed Consoolidated Financia l Statements andd Notes to the Co
ondensed Consoolidated Financia
al Statements aree inin the Directorrs’ opinion the Co
accordance with the Corporatio
ons Act 2001, inccluding:•

section 3
304, that they com
mply with the Australian Accountting Standards an
nd any further requirements of thee Corporations Regulations
R
2001
1;
and

•

section 3305, that they givve a true and fair view of the finanncial position of the Group as at 31
3 March 2015 aand of its perform
mance for the halff
year endded on that date; andin the Directorrs’ opinion as at the
t date of this declaration there are reasonable groundsgto believ
ve that the Comppany will be able to pay its debts as
and when theyy become due annd payable.

Signed in accordance with a resoluttion of the Directo
ors.

Dav
vid M Gonski, AACCha
airmanMichael R P Sm
mith, OBE
Director

M 2015
4 May

Res
sponsibility stattement of the Directors
Din accoordance with thee Disclosure annd Transparencyy Rule 4.2.10(3)((b) of the Unitedd Kingdom
Financial Conductt Authority
Thee Directors of Australia and New Zealand Banking
g Group Limited confirm to the be
est of their knowledge that:
the Condensed Con
nsolidated Financcial Statements anda Notes to thee Condensed Con
nsolidated Financial Statements ffor the half year ended 31 Marchh201
15 and Directors’’ Report (includinng matters included by reference)) and Directors’ DeclarationD
as se
et out on pages 994 to 124 as welll as the additionaalinformation on pages 139 to 140 includes a fair review of:(i)e occurred during
g the first six monnths of the financ
cial year, and theeir impact on thee Condensed Con
nsolidated Financial
the important events that haveandStatements; a(ii)

a description of the principal risks and uncerta
ainties for the rem
maining six month
hs of the financia
al year.

ors.
Signed in accordance with a resoluttion of the DirectoDav
vid M Gonski, AACCha
airmanMichael R P Sm
mith, OBE
Director

4 May
M 2015124

AU
UDITOR’S REV
VIEW REPORTT AND INDEPE
ENDENCE DE
ECLARATION

Ind
dependent auditor’s review reeport to the meembers of Austtralia and New Zealand Banking Group Lim
mited

Rep
port on the conddensed consoliidated financial statementsWee have reviewed tthe accompanyin
ng half year conddensed consolidaated financial sta
atements of Austrralia and New Zeealand Banking GroupG
Limited (thhe“Coompany”) which ccomprises the coondensed consolidated balance ssheet as at 31 Ma
arch 2015, condeensed consolidatted income state
ement andconndensed consolid
dated statement of comprehensiv
ve income, condeensed consolidatted statement of changes in equitty and condense
ed consolidated cashcflow
w statement for th
he half year ende
ed on that date, notesn
1 to 21 com
mprising a basis of preparation and other explanaatory notes, and the directors’
decclaration of the GGroup comprisingg the Company and the entities it controlled at thee half year’s end oro from time to ti me during the ha
alf year.
Dire
ectors’ responsib
bility for the half yearycondensed consolidated finaancial statementssThee directors of the Company are reesponsible for thee preparation of the half year con
ndensed consolid
dated financial sttatements that give a true and fairview
w in accordance with Australian AccountingAStand
dards and the Coorporations Act 2001
2
and for such internal controols as the directorrs determine is
nec
cessary to enable
e the preparationn of the half year condensed conssolidated financia
al statements tha
at are free from mmaterial misstate
ement, whether due
to fraudfor error.
Aud
ditors’ responsibiility
Ourr responsibility iss to express a conclusion on the halfh year condennsed consolidated
d financial statem
ments based on oour review. We conductedcourreview in accordancce with Auditing Standard
S
on Rev
view Engagemennts ASRE 2410 Review
Rof a Finanncial Report Perf
rformed by the Independent Audittorof thet Entity, in ordeer to state whether, on the basis ofo the procedurees described, we have become aw
ware of any matte
ter that makes us
s believe that theehalff year condensed
d consolidated fin
nancial statemen
nts are not in acccordance with thee Corporations Act
A 2001 includingg: giving a true anda fair view of thheGro
oup’s financial po
osition as at 31 March
M2015 and its
i performance ffor the half year endedeon that daate; and complyinng with Australian AccountingSta
andard AASB 134
4 Interim Financiial Reporting andd the Corporationns Regulations 2001. As auditor ofo Australia and N
New Zealand Ba
anking Group
Lim
mited, ASRE 2410
0 requires that we
w comply with th
he ethical requireements relevant to the audit of thee annual report.
A reeview of a half ye
ear condensed consolidatedc
finan
ncial statements consists of making enquiries, primarily of personns responsible for financial andacc
counting matters,, and applying annalytical and othe
er review proced ures. A review iss substantially les
ss in scope than an audit conduc
cted in accordancce
withh Australian Auditing Standards anda consequently
y does not enablle us to obtain as
ssurance that wee would become aaware of all significant matters th
hat
mig
ght be identified in an audit. Accordingly, we do noot express an auudit opinion.
Inddependence
In conducting
cour reeview, we have compliedcwith thee independence rrequirements of thet Corporations
s Act 2001.
Con
nclusionBas
sed on our review
w, which is not an audit, we havee not become awa
ware of any matteer that makes us believe that the hhalf year conden
nsed consolidateddfina
ancial statementss of Australia andd New Zealand Banking
B
Group Liimited is not in accordance with the Corporationss Act 2001, includ
ding:
(a)

giving a tru
ue and fair view ofo the Group’s fin
nancial position aas at 31 March 20
015 and of its performance for theehalf year ennded on that datee; and(b)complying w
with Australian AccountingAStanddard AASB 134 IInterim Financial Reporting and th
he Corporations Regulations 200
01.

Melbourne, Australiia

Andre
ew Yates
Partneer

4 May
M 2015Lea
ad Auditor’s Ind
dependence Dec
claration under section 307C oof the Corporatio
ons Act 2001
To: the directors off Australia and New Zealand Banking Group Limitted
I deeclare that, to thee best of my know
wledge and belie
ef, in relation to thhe review for thee half year ended 31 March 2015,, there have been:(i)no contrave
entions of the au
uditor independen
nce requirementss as set out in the Corporations Act
A 2001 in relatioon to the review;; and(ii)

no contrave
entions of any ap
pplicable code off professional connduct in relation to the review.

Melbourne, Australiia
4 May
M 2015

Andre
ew Yates
Partneer

KPM
MG, an Australian pa rtnership and a mem
mber firm of the KPMG
G network of indepenndent member firms affiliated with KPMG International Coopeerative (”KPMG Intern
national”), a Swiss enntity.
Liabbility limited by a scheeme approved underr Professional Standa
ards Legislation.

125

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATIONThis page has been left blank intentionally

126

SUPPLEMENTARY INFORMATIONCONTENTS

Section 9 – Supplementary information
Capital management
Average balance sheet and related interest
Full time equivalent staff
Exchange rates
Funds management and insurance income reconciliation
Derivative financial instruments
Summary of principal risks and uncertainties

127

SUPPLEMENTARY INFORMATION
Capital management

ANZ provides capital information as required under APRA’s prudential standard APS 330: Public Disclosure Attachment A. This information is located in
the Regulatory Disclosures section of ANZ’s website: shareholder.anz.com/pages/regulatory-disclosure.
As at

Qualifying Capital
Tier 1

Mar 15v. Mar 14

47,0386%

11%(1,211)(1,071)

-57%

-52%

51,53248,07345,967

7%

12%

Table 2

(17,796)(16,297)(15,947)

9%12%33,736

31,77630,0206%

12%

Table 3

Table 4

Total qualifying capital

7,352

6,825

7,279

8%

1%

41,08838,60137,299

6%

10%

7,716

7,138

6,335

8%

22%

48,80445,73943,634

7%

12%

7%

7%

Capital adequacy ratios
Common Equity Tier 1

8.7%

8.8%

8.3%

Tier 1

10.6%

10.7%

10.3%

Tier 2

2.0%

2.0%

1.8%

Total

12.6%

12.7%

12.1%

386,863361,529

360,740

Risk weighted assets

Mar 15v. Sep 14

49,284Tier 1 capital

Tier 2 capital

Mar 14$M(519)

Common Equity Tier 1 capital
Additional Tier 1 capitalSep 14$M

52,051Gross Common Equity Tier 1 capital
Deductions

Mar 15$M

Table 1

Shareholders' equity and non-controlling interests
Prudential adjustments to shareholders' equity

Movement

Table 5128

SUPPLEMENTARY INFORMATION
Capital management, cont’d
As at
Mar 15$M

Movement

Sep 14$M

Mar 14$M

Sep 14v. Mar 14

Sep 14v. Sep 13

Table 1: Prudential adjustments to shareholders' equity
Treasury shares attributable to ANZ Wealth policy holders
Reclassification of preference share capital
Accumulated retained profits and reserves of insurance and funds management
entities

287

249

275

15%

4%

-

(871)

(871)

-100%

-100%

(951)

(794)

(727)

20%

31%

Deferred fee revenue including fees deferred as part of loan yields

397

392

391

1%

2%

Available-for-sale reserve attributable to deconsolidated subsidiaries

(150)

(105)

(81)

43%

85%

Other

(102)

(82)

(58)

24%

76%

Total

(519)

(1,211)(1,071)

-57%

-52%

Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and
New Zealand)(4,369)(3,995)(4,126)9%

6%

Intangible component of investments in ANZ Wealth Australia and New Zealand(2,117)(2,096)(2,107)1%

0%

Capitalised software(2,631)(2,401)(2,252)

10%

17%

Capitalised expenses including loan and lease origination fees

Table 2: Deductions from Common Equity Tier 1 capital(1,197)(1,099)(1,058)9%

13%

Applicable deferred net tax assets

(610)

(809)

(934)

-25%

-35%

Expected losses in excess of eligible provisions

(374)

(240)

(145)

56%

large

Investment in other insurance and funds management subsidiaries

(401)

(402)

(428)

0%

-6%

Investment in ANZ Wealth Australia and New Zealand

(990)

(979)

(984)

1%

1%

(4,499)(3,811)(3,565)

18%

26%

(608)

(465)

(348)

31%

75%

(17,796)(16,297)(15,947)

9%

12%Investment in banking associates
Other deductions
Total

Table 3: Additional Tier 1 capital
Convertible Preference Shares
ANZ CPS1

-

-

454

n/a

-100%

ANZ CPS2

1,969

1,967

1,965

0%

0%

ANZ CPS3

1,335

1,333

1,331

0%

0%

ANZ Capital Notes 1

1,110

1,109

1,107

0%

0%

ANZ Capital Notes 2

1,597

1,595

1,593

0%

0%

ANZ Capital Notes 3

958

-

-

n/a

n/a

ANZ Bank NZ Capital Notes

484

-

-

n/a

n/a

-

871

871

-100%

-100%

Preference Shares
Regulatory adjustments and deductions

(101)

(50)

(42)

large

large

Total

7,352

6,825

7,279

8%

1%

17%

Table 4: Tier 2 capital
249

228

212

9%

Perpetual subordinated notes

1,211

1,087

1,108

11%

9%

Subordinated debt

7,799

6,516

5,668

20%

38%

General reserve for impairment of financial assets

Regulatory adjustments and deductions

(336)

(399)

(354)

-16%

-5%

Transitional adjustments(1,207)

(294)

(299)

large

large

Total

7,716

7,138

6,335

8%

22%

129

SUPPLEMENTARY INFORMATIONAs at

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Table 5: Risk weighted assets
On balance sheet

241,807

221,147

217,606

9%

11%

Commitments

56,68353,14053,777

7%

5%

Contingents

16,212

14,65812,90311%

26%

Derivatives

24,995

19,94021,04225%

19%

Total credit risk

339,697

308,885

305,328

10%

11%

6,042

7,048

7,104

-14%

-15%

Market risk - Traded
Market risk - IRRBB

7,690

13,627

16,359-44%-53%

Operational risk

33,43431,96931,9495%

5%

Total risk weighted assets

386,863361,529

360,740

7%

7%

As at

Movement

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Corporate

140,451

129,087

123,743

9%

14%

Sovereign

5,385

4,923

4,545

9%

18%

Bank

22,07820,32920,2699%

9%Residential mortgage

53,50150,06850,426

7%

6%

Qualifying revolving retail (credit cards)

7,775

7,546

7,260

3%

7%

Other retail

31,66426,85826,41618%

20%

Credit risk weighted assets
subject to Advanced IRB approach

260,854

238,811

232,659

9%

12%

Credit risk specialised lending exposuressubject to slotting criteria

31,44229,50528,522

7%

10%

Corporate

27,03323,121

26,255

17%

3%

Residential mortgage

2,603

2,344

1,966

11%

32%

Qualifying revolving retail (credit cards)

2,080

1,908

1,796

9%

16%

Other retail

1,191

1,081

1,073

10%

11%

Credit risk weighted assets subject to Standardised approach

32,90728,45431,09016%

6%Credit Valuation Adjustment andQualifying Central Counterparties

9,630

7,394

8,065

30%

19%

Credit risk weighted assets relating to securitisation exposures

1,067

1,030

1,253

4%

-15%

Other assets

3,797

3,691

3,739

3%

2%

339,697

308,885

305,328

10%

11%

Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach

Subject to Standardised approach

Total credit risk weighted assets

130

SUPPLEMENTARY INFORMATION
Capital management, cont’dCollective Provision and Individual
Provision

Table 7: Total provision for credit impairment and regulatory expected
loss by division

Regulatory Expected Loss

Australia

Mar 15$M
1,796

Sep 14$M
1,777

Mar 14$M
1,889

Mar 15$M
2,563

Sep 14$M
2,446

Mar 14$M
2,481International and Institutional Banking

1,681

1,618

1,770

1,456

1,329

1,570

New Zealand

536

520

594

779

718

784

Global Wealth

12

15

17

12

13

14

Other

3

3

43

-

-

-

4,028

3,933

4,313

4,810

4,506

4,849

Total provision for credit impairment and regulatory expected loss

As at

Movement

Table 8: Expected loss in excess of eligible provisions

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

Basel expected loss: non-defaulted

2,735

2,486

2,476

10%

10%

n/a

n/a
2%

Less: Qualifying collective provisionCollective provision(2,914)(2,757)(2,843)

6%

Non-qualifying collective provision

304

283

300

7%

1%

Standardised collective provision

249

228

212

9%

17%

Non-defaulted excess included in deduction

374

240

145

56%

large

2,075

2,020

2,373

3%

-13%

-24%

Basel expected loss: defaulted
Less: Qualifying individual provision
Individual provision(1,114)(1,176)(1,470)-5%Additional individual provision for partial write offs1

(859)

(777)

(797)

11%

8%

Standardised individual provision

103

150

153

-31%

-33%

Collective provision on advanced defaulted

(271)

(256)

(275)

6%

-1%

(66)

(39)

(16)

69%

large

66

39

16

69%

large

-

-

-

n/a

n/a

374

240

145

56%

large

Shortfall in expected loss not included in deduction
Defaulted excess included in deduction

Gross deduction
1.

Included in eligible provisions post September 2013 due to a change in RWA calculation methodology.

Table 9: APRA Basel 3 Common Equity Tier 1
Half Year
Mar 15 vs Sep 14
APRA Basel 3 Common Equity Tier 1
Cash profit after preference share dividends+102bps($3.7B)

Risk weighted assets
Portfolio growth and mix-39bpsRisk migration and expected losses in excess of eligible provisions+2bps

Non-credit risk

+15bpsCapital retention in insurance businesses and associates-12bpsCapitalised software and intangibles-5bps

Other items-4bps

Organic capital generation+59bpsOrdinary share dividends (net of dividend reinvestment plan)-64bps

Other

-2bps

Total Common Equity Tier 1 movement-7bps

March 2015 APRA Basel 3 Common Equity Tier 1 ratio

8.7%

131

SUPPLEMENTARY INFORMATION
1

Average balance sheet and related interest

Half Year Mar 15

Half Year Sep 14

Half Year Mar 14

Avg bal
$M

Int
$M

Rate
%

Avg bal
$M

Int
$M

Rate
%

Avg bal
$M

Int
$M

Rate
%

Overdrafts and credit cards

20,901

1,060

10.2%

19,552

1,050

10.7%

19,245

1,031

10.7%

Commercial bills outstanding

14,168137

1.9%

14,767151

2.0%

15,468152

2.0%

Term loans - housing

279,757

7,023

5.0%

268,209

6,799

5.1%

259,292

6,503

5.0%

Term loans - non-housing

219,047

5,243

4.8%

213,467

5,175

4.8%

196,453

4,896

5.0%

9,438

365

7.8%

9,107

387

8.5%

10,045408

8.1%

Gross loans and advances

Lease financing

2,555

45

3.5%

2,312

139

12.0%

2,101

59

5.6%

545,866

13,873

5.1%

527,414

13,701

5.2%

502,604

13,0495.2%

Cash45,498276

1.2%

32,060168

1.0%37,342237

1.3%

Settlement Balances owed to ANZ

15,26821

0.3%

14,26825

0.3%

13,22922

0.3%

Collateral Paid

7,548

31

0.8%

7,556

18

0.5%

3,310

21

1.3%

Trading and available-for-sale assets

87,995

1,187

2.7%

79,015

1,144

2.9%

74,615

1,029

2.8%

Regulatory Deposits

1,183

4

0.7%

1,178

5

0.8%

1,225

5

0.8%

Other loans and advances

Other interest earning assets

Other assets

Total interest earning assets

11

2

n/a

24

33

n/a

75

67

n/a

157,503

1,521

1.9%

134,101

1,393

2.1%

129,796

1,381

2.1%

703,369

15,394

4.4%

661,515

15,094

4.6%

632,400

14,4304.6%

Non-interest earning assets
Derivatives

65,11442,02742,951

Premises and equipment

2,180

2,122

2,143

Insurance assets

34,092

33,63832,765

Other assets

29,55928,96528,626

Provisions for credit impairment(3,961)(4,219)(4,342)

126,984

102,533

102,143

830,353764,048734,543

Total average assets
Interest bearing deposits andother borrowings
Certificates of deposit

60,740884

2.9%

57,865843

2.9%

57,937833

2.9%

Term deposits

196,891

2,259

2.3%

192,003

2,333

2.4%

193,718

2,393

2.5%

Other deposits bearing interest and otherborrowings

200,501

2,363

2.4%

182,432

2,234

2.4%

170,617

2,016

2.4%

Deposits from banks

54,063356

1.3%

49,134317

1.3%

44,322267

1.2%

Commercial paper

21,135262

2.5%

18,791239

2.5%

15,272197

2.6%

Borrowing corporations' debt

1,474

34

4.6%

1,405

32

4.5%

1,405

30

4.3%

534,804

6,158

2.3%

501,630

5,998

2.4%

483,271

5,736

2.4%

3,134

18

1.2%

2,640

14

1.1%

2,321

12

1.1%
0.8%

Other interest bearing liabilities
Settlement Balances owed by ANZ
Collateral Received

5,339

9

0.3%

5,425

9

0.3%

2,505

10

Debt issuances & subordinated debt

95,815

1,901

4.0%

89,272

1,841

4.1%

84,466

1,702

4.0%

Other liabilities

6,606

170

5.2%

5,744

200

6.9%

5,070

192

7.6%

110,894

2,098

3.8%

103,081

2,064

4.0%

94,362

1,916

4.1%

645,698

8,256

2.6%

604,711

8,062

2.7%

577,633

7,652

2.7%

Total interest bearing liabilities
Non-interest bearing liabilities
Deposits

17,001

15,54815,213

Derivatives

64,382

42,66744,722

Insurance Liabilities

34,97433,86632,894External unit holder liabilities

3,181

3,334

3,510

Other liabilities

14,62016,387

14,392

134,158

111,802110,731779,856

716,513688,364

Total average liabilities
1.

Averages used are predominantly daily averages.

132

SUPPLEMENTARY INFORMATION
1

Average balance sheet and related interest (cont’d)Half Year Mar 15

Half Year Sep 14

Half Year Mar 14

Avg bal
$M

Int
$M

Rate
%

Avg bal
$M

Int
$M

Rate
%

Avg bal
$M

Int
$M

Rate
%

Gross loans and advances
Australia

358,774

9,480

5.3%

352,275

9,631

5.5%

332,847

9,249

5.6%

Asia Pacific, Europe & America

86,172

1,238

2.9%

78,950

1,119

2.8%

76,408

1,126

3.0%

New Zealand

100,920

3,155

6.3%

96,189

2,951

6.1%

93,349

2,674

5.7%

545,866

13,873

5.1%

527,414

13,701

5.2%

502,604

13,0495.2%

Australia

50,278725

2.9%45,185712

3.1%

42,539650

3.1%

Asia Pacific, Europe & America

25,134212

1.7%

21,375188

1.8%

20,443156

1.5%

New Zealand

12,583250

4.0%

12,455244

3.9%

11,633223

3.8%

87,995

1,187

2.7%

79,015

1,144

2.9%

74,615

1,029

2.8%

Australia

428,636

10,422

4.9%

407,857

10,4655.1%

392,131

10,106

5.2%

Asia Pacific, Europe & America

157,469

1,512

1.9%

141,946

1,377

1.9%

132,073

1,356

2.1%

New Zealand

117,264

3,460

5.9%

111,712

3,252

5.8%

108,196

2,968

5.5%

703,369

15,394

4.4%

661,515

15,094

4.6%

632,400

14,430

4.6%

Trading and available-for-sale assets

Total interest earning assets2

Total average assets
Australia

524,435

484,250

466,487

Asia Pacific, Europe & America

176,849

158,297

149,337

New Zealand

129,069

121,501

118,719

Total average assets

830,353764,048734,543

36.8%

36.7%

36.4%

% of total average assets attributable tooverseas activities
Interest bearing deposits andother borrowings
Australia

311,454

4,243

2.7%

296,464

4,277

2.9%

284,780

4,190

2.9%

Asia Pacific, Europe & America

146,851488

0.7%

133,203422

0.6%

129,887444

0.7%

New Zealand

76,499

1,427

3.7%

71,963

1,299

3.6%

68,604

1,102

3.2%

534,804

6,158

2.3%

501,630

5,998

2.4%

483,271

5,736

2.4%

3.2%

Total interest bearing liabilities2
Australia

387,583

5,706

3.0%

368,332

5,769

3.1%

355,095

5,637

Asia Pacific, Europe & America

163,031604

0.7%

147,090516

0.7%

138,400

501

0.7%

New Zealand

95,084

1,946

4.1%

89,289

1,777

4.0%

84,138

1,514

3.6%

645,698

8,256

2.6%

604,711

8,062

2.7%

577,633

7,652

2.7%

Total average liabilities
Australia

491,356454,341

439,399

Asia Pacific, Europe & America

179,210

160,829

151,984

New Zealand

109,290

101,343

96,981

779,856

716,513688,364

37.0%

36.6%

36.2%

50,131

46,66445,308% of total average liabilities attributable tooverseas activities

Total average shareholder's equity
Ordinary share capital, reserves and retained
earnings3
Preference share capital

Total average liabilities and shareholder'sequity
1.
2.
3.

366

871

871

50,49747,535

46,179830,353764,048734,543

Averages used are predominantly daily averages.
Intra-group interest earning assets and interest income and Intra-group interest earning liabilities and interest expense have been eliminated.
Average shareholders’ equity at 31 March 2015 includes $287 million of Global Wealth shares that are eliminated from the statutory shareholders’ equity balance (Sep 14: $247 million;
Mar 14: $275 million).

133

SUPPLEMENTARY INFORMATION
Half Year
Mar 15%

Sep 14%

Mar 14%Australia

4.98

5.22

5.26

Asia Pacific, Europe & America

1.82

1.81

1.91

New Zealand

5.92

5.81

5.50

Group

4.39

4.55

4.58

Gross earnings rate1

Interest spread and net interest margin may be analysed as follows:
Half Year
Mar 15%

Sep 14%

Mar 14
%

2.02

2.10

2.08

0.26

0.29

0.30

2.28

2.39

2.38

1.07

1.11

1.18

0.03

0.02

0.02

1.10

1.13

1.20

Net interest spread

1.82

1.84

1.90

Interest attributable to net non-interest bearing items

0.45

0.45

0.42

2.27

2.29

2.32

1.82

1.89

1.92

0.22

0.23

0.23

2.04

2.12

2.15

2.51

2.54

2.55

Australia1
Net interest spread
Interest attributable to net non-interest bearing items
Net interest margin - Australia

2Asia Pacific, Europe & America1
Net interest spread
Interest attributable to net non-interest bearing items
2

Net interest margin - Asia Pacific, Europe & America

New Zealand1

2

Net interest margin - New ZealandGroup
Net interest spread
Interest attributable to net non-interest bearing items
Net interest margin

2

2

Net interest margin (excluding Global Markets)
1.
2.

Geographic gross earnings rate, net interest spread and net interest margin are calculated gross of intra group items (Intra-group interest earning assets and associated interest income
and intra-group interest bearing liabilities and associated interest expense).
Statutory basis.

134

SUPPLEMENTARY INFORMATION
Full Time Equivalent Staff
At 31 March 2015, ANZ employed 51,243 people worldwide (Sep 14: 50,328, Mar 14: 49,850) on a full-time equivalent basis ("FTEs").
During the March 2015 half, FTE comparatives were restated to align with the current period presentation following:

the Merchant Services and Commercial Credit Cards businesses being transferred out of the Cards and Payments business unit in Australia
Retail and split between Australia C&CB and IIB based on customer ownership; andthe continued realignment of support functions where certain enablement functions have been transferred from the operating divisions to GTSO
and Group Centre.

As atDivision

Movement

Australia

Mar 15
10,586

Sep 14
10,245

Mar 14
9,907

Mar 15v. Sep 14
3%

Mar 15v. Mar 14
7%

International and Institutional Banking

7,802

7,768

8,145

0%

-4%

New Zealand

5,090

5,059

5,215

1%

-2%

Global Wealth

2,538

2,290

2,284

11%

11%

GTSO and Group Centre

25,227

24,96624,2991%

4%

Totals51,24350,32849,850

2%

3%

As at

Geography

Movement

Australia

Mar 1522,096

Sep 14
21,591

Mar 14
21,821

Mar 15v. Sep 142%

Mar 15v. Mar 14
1%

Asia Pacific, Europe & America

20,91020,512

19,653

2%

6%

New Zealand

8,237

8,225

8,376

0%

-2%

Totals51,24350,32849,8502%

3%

Exchange rates
Major exchange rates used in translation of results of offshore controlled entities and branches and investments in associates were as follows:
Balance sheet

Profit & Loss Average

As atHalf Year

Chinese Yuan

Mar 154.7365

Sep 145.3787

Mar 145.7480Mar 155.0786

Sep 145.7544

Mar 145.5544Euro

0.70570.68950.67160.69090.68850.6672

Great British Pound

0.51630.53830.55520.52950.55390.5565

Indian Rupee

47.7586

53.94155.29650.91155.93356.400Indonesian Rupiah

9,987.2

10,659.9

10,488.7

10,271.3

10,855.2

10,719.3

Malaysian Ringgit

2.83722.86323.01692.86232.98532.9644

New Zealand Dollar

1.01881.12191.06681.06911.0903

1.0959Papua New Guinea Kina

2.04392.17172.2356

2.12332.26512.2054

United States Dollar

0.76340.87520.92330.82000.92890.9113135

SUPPLEMENTARY INFORMATION
Funds Management and Insurance Income Reconciliation
Half Year

Movement

Reference
Page

Mar 15$M

Sep 14$M

Mar 14$M

Mar 15v. Sep 14

Mar 15v. Mar 14

90

979

927

611

6%

60%

large

Net funds management and insurance income - statutory basis
Adjustments between cash and statutory profit
Treasury shares adjustment

90

86

(16)

40

large

Policyholders tax gross up

90

(277)

(213)

(29)

30%

large

Revaluation of policy liabilities

90

(97)

(32)

(5)

large

large

Net funds management and insurance income - cash basis

91

691

666

617

4%

12%

Global Wealth - Net funds management and insurance income

71

665

642

607

4%

10%

Australia - Funds management and insurance income

19

18

19

6%

0%

International and Institutional Banking - Funds management and insuranceincome

48

49

41

-2%

17%

New Zealand - Funds management and insurance income

42

38

36

11%

17%

Inter-segment eliminations

(83)

(81)

(86)

2%

-3%

691

666

617

4%

12%

Net funds management and insurance income - cash basis

91

136

SUPPLEMENTARY INFORMATION
Derivative financial instruments
Derivatives
Derivative financial instruments are contracts whose value is derived from one or more underlying variables or indices defined in the contract, require little
or no initial net investment and are settled at a future date. Derivatives include contracts traded on registered exchanges and contracts agreed between
counterparties. The use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading and sales
activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in foreign exchange and interest rates as part of its asset andliability management activities.
The following table provides an overview of the Group’s foreign exchange, interest rate, commodity and credit derivatives. They include all trading andbalance sheet risk management contracts. Notional principal amounts measure the amount of the underlying physical or financial commodity andrepresent the volume of outstanding transactions. They are not a measure of the risk associated with a derivative. The derivative instruments becomefavourable (assets) or unfavourable (liabilities) as a result of fluctuations in market rates relative to the terms of the derivative. Notional amounts of thecontracts are presented gross and are not recorded on the balance sheet.

As at 31 March 2015
Notional
Principal
amount$M

As at 30 September 2014
Notional
Principal
amount$M

Total fair value
Assets$M

Liabilities$M

Total fair value
Assets$M

Liabilities$M

Foreign exchange contracts
Spot and forward contracts

1,074,571

11,972(10,515)746,023

10,264(9,328)629,811

15,369(19,220)

640,600

19,257(19,043)

Options purchased

83,983

2,539-

105,985

2,079-

Options sold

104,981-(2,333)139,062-(1,923)

1,893,346

29,880(32,068)

1,631,670

31,600(30,294)

43,7472,232(1,668)33,886

1,612

(946)

Swap agreements

Commodity contracts
Derivative contracts
Interest rate contracts
Forward rate agreements

165,21610(21)

65,754

4(11)

Swap agreements

3,595,286

39,878(37,062)

2,837,264

22,341(20,436)(93)

Futures contracts

150,37449(255)

128,208

33

Options purchased

72,9371,140-

56,573505-

Options sold68,070-(1,722)47,827-(823)

4,051,883

41,077(39,060)

3,135,626

22,883(21,363)

753

59

-

1,171

58

-

19,947277(323)

17,060162(224)

Total credit derivatives purchased

20,700336(323)

18,231

220(224)

Structured credit derivatives sold

753

-

(77)

1,171

-

(80)

Other credit derivatives sold1

19,30555(14)

17,35954(18)

Total credit derivatives sold20,05855(91)

18,53054(98)

Total credit default swaps

40,758391(414)

36,761274(322)

6,029,734

73,580(73,210)

4,837,943

56,369(52,925)

Credit default swaps
Structured credit derivatives
purchased
Other credit derivatives
purchased1

Total
1.

The notional amounts comprise vanilla credit default swap transactions including credit indices such as itraxx (Europe and Australia) and CDX. These credit default swap trades aretransacted in conjunction with other financial instruments by reference to the traded market risk limit framework which includes VaR, name and rating specific concentration limits,
sensitivity limits and stress testing limits. VaR disclosures are set out on page 63.

137

SUPPLEMENTARY INFORMATIONAs at 31 March 2015
Notional
Principal
amount$M

As at 31 March 2014
Notional
Principal
amount$M

Total fair value
Assets$M

Liabilities$M

Total fair value
Assets$M

Liabilities$M

Foreign exchange contracts
Spot and forward contracts

1,074,571

11,972(10,515)542,709

7,001(7,408)

Swap agreements

629,811

15,369(19,220)

393,063

11,159(14,100)

Options purchased

83,983

2,539-

92,0302,017-

Options sold

104,981-(2,333)

129,306-(1,812)

1,893,346

29,880(32,068)

1,157,108

20,177(23,320)

43,7472,232(1,668)28,6701,277(1,194)

165,21610(21)

75,950

2(4)

Swap agreements

3,595,286

39,878(37,062)2,249,000

20,303(19,032)

Futures contracts

150,37449(255)

151,466

330

(333)

Options purchased

72,9371,140-

43,803

1,373-

Options sold68,070-(1,722)

48,735-(1,590)4,051,883

41,077(39,060)

2,568,954

22,008(20,959)

753

59

-

4,777

103

-

19,947277(323)

15,452

189(227)

Total credit derivatives purchased

20,700336(323)

20,229292(227)

Structured credit derivatives sold

753

-

(77)

4,777

-

(127)

Other credit derivatives sold1

19,30555(14)

14,08175(49)

Total credit derivatives sold20,05855(91)

18,85875(176)

Total credit default swaps

40,758391(414)

39,087367(403)

6,029,734

73,580(73,210)

3,793,819

43,829(45,876)

Commodity contracts
Derivative contracts
Interest rate contracts
Forward rate agreements

Credit default swaps
Structured credit derivatives
purchased
Other credit derivatives
purchased1

Total
1.

The notional amounts comprise vanilla credit default swap transactions including credit indices such as itraxx (Europe and Australia) and CDX. These credit default swap trades aretransacted in conjunction with other financial instruments by reference to the traded market risk limit framework which includes VaR, name and rating specific concentration limits,
sensitivity limits and stress testing limits. VaR disclosures are set out on page 63.

138

SUPPLEMENTARY INFORMATION
Summary of principal risks and uncertainties
The success of the Group’s strategy is underpinned by sound management of its risks. As the Group progresses on its strategic path of becoming thebest connected and most respected bank across the region, the risks faced by the Group will evolve in line with the strategic direction. The success of theGroup’s strategy is dependent on its ability to manage the broad range of interrelated risks it is exposed to across our expanding geographic footprint.
The principal risks and uncertainties facing the Group are unchanged from those disclosed in ANZ’s 2014 Annual Report. However, the operational, legal
and regulatory landscape in which ANZ operates has continued to evolve since the prior financial period.
Risk Appetite
ANZ’s risk appetite is set by the Board and integrated within ANZ’s strategic objectives. The risk appetite framework underpins fundamental principles ofstrong capitalisation, robust balance sheet and sound earnings, which protects ANZ’s franchise and supports the development of an enterprise-wide risk
culture. The framework provides an enforceable risk statement on the amount of risk ANZ is willing to accept and it supports strategic and core businessactivities and customer relationships with the objective of ensuring that:
•
•
•
•
•

only permitted activities are engaged in;the scale of permitted activities, and subsequent risk profile, does not lead to potential losses or earnings volatility that exceeds ANZ approved risk
appetite;risk is expressed quantitatively via limits and tolerances;management focus is brought to bear on key and emerging risk issues and mitigating actions; andrisk is linked to the business by informing, guiding and empowering the business in executing strategy.

ANZ’s risk management is viewed as a core competency and to ensure that risks are identified, assessed and managed in an accurate and timely
manner, ANZ has:••

An independent risk management function, with both central and enterprise-wide functions (which typically cover such activities as risk
measurement, reporting and portfolio management), together with embedded risk managers within the businesses.
Developed frameworks to provide structured and disciplined processes for managing key risks. These frameworks include articulation of theappetite for these risks, portfolio direction, policies, structures, limits and discretions.

Material Risks
All the Group’s activities involve, to varying degrees, the analysis, evaluation, acceptance and management of risks or combinations of risks. The material
risks facing the Group and its approach to management of those risks are described below:
Capital Adequacy Risk - is the risk of loss arising from ANZ failing to maintain the level of capital required by prudential regulators and other key
stakeholders (shareholders, debt investors, depositors, rating agencies) to support ANZ's consolidated operations and risk appetite.
Losses include those arising from diminished reputation, a reduction in investor/counterparty confidence, regulatory non-compliance (e.g. fines andbanking license restrictions) and an inability for ANZ to continue to do business. ANZ pursues an active approach to capital management, which isdesigned to protect the interests of depositors, creditors and shareholders.
Credit Risk - is the risk of financial loss resulting from a counterparty failing to fulfil its obligations, or from a decrease in credit quality of a counterparty
resulting in a loss in value. ANZ has a comprehensive framework to manage credit risk. The framework is top down, being defined by credit principles
and policies. The effectiveness of the credit risk management framework is assessed through various compliance and monitoring processes. These,
together with portfolio selection, define and guide the credit process, organisation and staff.
ANZ's customers could also be impacted by climate change and changes to laws or regulations, or other policies adopted by governments or regulatory
authorities, including carbon pricing and climate change adaptation or mitigation policies. We factor these risks into our customer evaluations, including in
the energy and extractive industries, primarily through an assessment of our customers' capacity to deal with climate change and any change toregulatory environments.
Market Risk - Market Risk stems from ANZ’s trading and balance sheet activities and is the risk to ANZ’s earnings arising from changes in interest rates,
foreign exchange rates, credit spreads, volatility, correlations or from fluctuations in bond, commodity or equity prices.
The key market risk factors include:
•
•
•
•
•

Interest rate risk: the potential loss arising from the change in the value of a financial instrument due to changes in market interest rates or theirimplied volatilities.
Currency rate risk: the potential loss arising from the decline in the value of a financial instrument due to changes in foreign exchange rates or theirimplied volatilities.
Credit spread risk: the potential loss arising from a change in value of an instrument due to a movement of its margin or spread relative to abenchmark.
Commodity risk: the potential loss arising from the decline in the value of a financial instrument due to changes in commodity prices, or their implied
volatilities.
Equity risk: the potential loss arising from a decline in value of financial instruments due to changes in equity prices or indices or their implied
volatilities.

Liquidity and Funding Risk - is the risk that the Group is unable to meet its payment obligations as they fall due, including repaying depositors or
maturing wholesale debt, or that the Group has insufficient capacity to fund increases in assets. The Global financial crisis highlighted the importance ofdifferentiating between stressed and normal market conditions in a name-specific crisis and the different behaviour that offshore and domestic wholesalefunding markets can exhibit during market stress events. ANZ’s short term liquidity scenario modelling stresses cash flow projections against multiple‘survival horizons’ over which the Group is required to remain cash flow positive.

139

SUPPLEMENTARY INFORMATION
Operational Risk - is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. This definition
includes legal risk and the risk of reputation loss, or damage arising from inadequate or failed internal processes, people and systems, but excludes
strategic risk. The objective of operational risk management is to ensure that risks are identified, assessed, measured, evaluated, treated, monitored andreported in a structured environment with appropriate governance oversight. ANZ does not expect to eliminate all operational risks, but to ensure that theresidual risk exposure is managed as low as reasonably practical based on a sound risk/reward analysis in the context of an international financial
institution.
Compliance Risk - is the probability and impact of an event that results in a failure to act in accordance with laws, regulations, industry standards andcodes, internal policies and procedures and principles of good governance as applicable to ANZ’s businesses. ANZ’s Compliance Framework is aligned
to key industry and global standards and benchmarks. It utilises the concept of a 'risk-based' approach to manage compliance. This allows theCompliance function to support divisions and businesses by taking a standardised approach to compliance management tasks. This enables ANZ to beconsistent in proactively identifying, assessing, managing, reporting and escalating compliance-related risk exposures while respecting the specificobligations of each jurisdiction in which we operate.
Insurance Risk - is the risk of unexpected losses resulting from worse than expected claims experience (variation in timing and amount of insurance
claims due to incidence or non-incidence of death, sickness, disability or general insurance claims) and includes inadequate or inappropriate
underwriting, claims management, reserving, insurance concentrations, reinsurance management, product design and pricing which will expose an
insurer to financial loss and the consequent inability to meet its liabilities. In the life insurance business, insurance risk arises primarily through mortality(death) and morbidity (illness and injury) and longevity risks. For general insurance business, insurance risk arises mainly through weather-related
incidents and similar calamities, as well as adverse variability in home, contents, motor, travel and other insurance claim amounts. Insurance risk ismanaged primarily by: product design to price all applicable risks into contracts; reinsurance to reduce liability for large individual risks; underwriting toprice/reserve for the level of risk associated with an individual contract; claims management to admit and pay only genuine claims; insurance experience
reviews to update assumptions and portfolio management to maintain a diversity of individual risks.
Reinsurance Risk - Reinsurance is an agreement in which one insurer (‘the reinsurer’) indemnifies another insurer for all or part of the risk of a policy
originally issued and assumed by that other insurer. Reinsurance is a risk transfer tool between the insurer and reinsurer. The main risk that arises withreinsurance is counterparty credit risk. This is the risk that a reinsurer fails to meet their contractual obligations, i.e. to pay reinsurance claims when due.
This risk is measured by assigning a counterparty credit rating or probability of default. Reinsurance counterparty credit risk is mitigated by restricting
counterparty exposures on the basis of financial strength and concentration.
Strategic Risk - Strategic Risks are risks that affect or are created by an organisation’s business strategy and strategic objectives. Where the strategy
leads to an increase in other Key Material Risks (e.g. Credit Risk, Market Risk, Operational Risk) the risk management strategies associated with theserisks form the primary controls. Management Board members will identify and assess potential strategic risks in the course of making decisions about the
future of ANZ. This will include analysis of potential merger & acquisition activity, exit strategies and the nature of resourcing. In assessment of strategicrisks, Management Board will consider impacts such as pricing and products; the systems and processes we need to deliver on the proposed strategy,
and capital implications. In monitoring the potential for strategic risk to materialise, ANZ must maintain a deep understanding of the key markets andjurisdictions in which we operate. This includes analysis of the economy and outlook, globally and locally; the actions of competitors; and being agile inour response to new and emerging technology.

140

DEFINITIONSAASs - Australian Accounting Standards.
AASB - Australian Accounting Standards Board. The term “AASB” is commonly used when identifying AASs issued by the AASB.
ADIs - Authorised Deposit-taking Institutions.
APRA - Australian Prudential Regulation Authority.
Cash and cash equivalents comprise coins, notes, money at call, balances held with central banks, liquid settlement balances (readily convertible to
known amounts of cash which are subject to insignificant risk of changes in value) and securities purchased under agreements to resell (“reverse repos”)
in less than three months.
Cash profit is a measure of profit which is prepared on a basis other than in accordance with accounting standards. Cash profit represents a measure of
the result of the ongoing business activities of the Group, enabling shareholders to assess Group and Divisional performance against prior periods andagainst peer institutions. To calculate cash profit, the Group excludes items from statutory net profit as noted below. These items are calculated
consistently period on period so as not to discriminate between positive and negative adjustments.
Gains and losses are adjusted where they are significant, or have the potential to be significant in any one period, and fall into one of three categories:
1.

non-core gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not
associated with the ongoing operations of the Group;2.

treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences thatwill reverse through earnings in the future; and3.

accounting reclassifications between individual line items that do not impact reported results, such as policyholder tax gross up.

Collective provision is the provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collective provision is
only recognised when a loss event has occurred. Losses expected as a result of future events, no matter how likely, are not recognised.
Covered bonds are bonds issued by an ADI to external investors secured against a pool of the ADI's assets (the cover pool) assigned to a bankruptcy
remote special purpose entity. The primary assets forming the cover pool are mortgage loans. The mortgages remain on the issuer's balance sheet. The
covered bond holders have dual recourse to the issuer and the cover pool assets. The mortgages included in the cover pool cannot be otherwise
pledged or disposed of but may be repurchased and substituted in order to maintain the credit quality of the pool. The Group issues covered bonds aspart of its funding activities.
Customer deposits represent term deposits, other deposits bearing interest, deposits not bearing interest and borrowing corporations’ debt excluding
securitisation deposits.
GLA – Gross Loans and Advances. This is made up of loans and advances, acceptances and capitalised brokerage/mortgage origination fees lessunearned income.
IFRS – International Financial Reporting Standards.
Impaired loans comprise drawn facilities where the customer’s status is defined as impaired.
Impaired assets are those financial assets where doubt exists as to whether the full contractual amount will be received in a timely manner, or whereconcessional terms have been provided because of the financial difficulties of the customer. Financial assets are impaired if there is objective evidenceof impairment as a result of a loss event that occurred prior to the reporting date, and that loss event has had an impact, which can be reliably estimated,on the expected future cash flows of the individual asset or portfolio of assets.
Individual provision is the amount of expected credit losses on financial instruments assessed for impairment on an individual basis (as opposed to on
a collective basis). It takes into account expected cash flows over the lives of those financial instruments.
Net interest margin is net interest income as a percentage of average interest earning assets.
Net loans and advances represents gross loans and advances less provisions for credit impairment.
Net tangible assets equal share capital and reserves attributable to shareholders of the Group less preference share capital and unamortised intangible
assets (including goodwill and software).
Operating expenses include personnel expenses, premises expense, technology expenses, restructuring expenses, and other operating expenses(excluding credit impairment charges).
Operating income includes net interest income, net fee and commission income, net funds management and insurance income, share of associates’
profit and other income.

141

DEFINITIONSRegulatory deposits are mandatory reserve deposits lodged with local central banks in accordance with statutory requirements.
Restructured items comprise facilities in which the original contractual terms have been modified for reasons related to the financial difficulties of thecustomer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond thosetypically offered to new facilities with similar risk.
Segment revenue includes net interest income, share of associates' profit and other operating income before the elimination of intra group items.

Segment review description
The Group operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand, and Global Wealth being the major
operating divisions. The IIB and Global Wealth divisions are coordinated globally. Global Technology, Services & Operations and Group Centre provide
support to the operating divisions, including technology, operations, shared services, property, risk management, financial management, strategy,
marketing, human resources and corporate affairs. The Group Centre also includes Group Treasury and Shareholder Functions.

Australia
The Australia division comprises the Retail and Corporate and Commercial Banking business units.

•

RetailRetail is responsible for delivering a full range of banking services to consumer customers, using capabilities in product management, analytics,
customer research, segmentation, strategy and marketing.
-Home Loans provides housing finance to consumers in Australia for both owner occupied and investment purposes, as well as providing
housing finance for overseas investors.

-

Cards and Payments provides unsecured lending products to retail customers.

-

Deposits provides transaction banking, savings and investment products, such as term deposits and cash management accounts.

Retail delivers banking solutions to customers across multiple distribution channels including the Australian branch network, ANZ Direct, specialist
sales channels and digital channels (including goMoney, Internet Banking, anz.com). The retail distribution network provides retail and wealthsolutions to consumers, as well as providing small business solutions and meeting the various cash and cheque handling needs of corporate,commercial and institutional customers.

•

Corporate and Commercial Banking (C&CB)-

Corporate Banking provides a full range of banking services including traditional relationship banking and sophisticated financial solutions,primarily to large private companies, smaller listed companies and multi-national corporation subsidiaries.

-

Regional Business Banking provides a full range of banking services to non-metropolitan commercial and Agri (including corporate)
customers.

-

Business Banking provides a full range of banking services, to metropolitan based small to medium sized business clients with a turnover of
A$5 million up to A$125 million.

-

Small Business Banking provides a full range of banking services to metropolitan and regional based small businesses in Australia with aturnover of up to A$5 million and lending up to A$1 million.

-

Esanda provides motor vehicle and equipment finance.

International and Institutional Banking
International and Institutional Banking (IIB) division comprises Global Products, Retail Asia Pacific and Asia Partnerships. IIB services three main
customer segments: Global Banking, International Banking and Retail Asia Pacific. Global Banking serves institutional customers with multi-product,
multi-geographic requirements, International Banking serves institutional customers with less complex needs and Retail Asia Pacific focuses on affluent
and emerging affluent customers across 21 countries.

•

Global Products
Global Products service Global Banking and International Banking customers across three product sets:-

Global Transaction Banking which provides working capital and liquidity solutions including documentary trade, supply chain financing,
structured trade finance as well as cash management solutions, deposits, payments and clearing.

-

Global Markets provides risk management services to clients globally on foreign exchange, interest rates, credit, commodities, debt capital
markets and wealth solutions. Markets provide origination, underwriting, structuring and risk management services, advice and sale of credit
and derivative products. The business unit also manages the Bank’s interest rate exposure as well as its liquidity position.

-

Global Loans and Advisory which provides specialised loan structuring and execution, loan syndication, project and export finance, debt
structuring and acquisition finance, structured asset finance and corporate advisory.

142

DEFINITIONS

Segment review description, cont’d•

Retail Asia Pacific provides end-to-end financial solutions to individuals and small businesses including deposits, credit cards, loans, investments
and insurance. Leveraging our distinctive footprint we enable client’s access to opportunities across the region and connect them to specialists fortheir banking needs in each location.

•

Asia Partnerships comprises of strategic partnerships and investments across Asia which provide the Bank with local business and relationshipaccess as well as country and regulatory insights.

New Zealand
The New Zealand division comprises Retail and Commercial business units.

•

RetailRetail provides products and services to personal customers via the branch network, mortgage specialists, the contact centre and a variety of self
service channels (internet banking, phone banking, ATMs, website and mobile phone banking). Core products include current and savings accounts,
unsecured lending (credit cards, personal loans and overdrafts) and home loans secured by mortgages over property. Retail distributes insurance
and investment products on behalf of the Global Wealth segment.

•

Commercial
Commercial provides services to Small Business Banking, Commercial & Agri (CommAgri), and UDC customers. Small Business Banking services
are offered to small enterprises (typically with annual revenues of less than NZD 5 million). CommAgri customers consist of primarily privately owned
medium to large enterprises. Commercial’s relationship with these businesses ranges from simple banking requirements with revenue from deposit
and transactional facilities, and cash flow lending, to more complex funding arrangements with revenue sourced from a wider range of products. UDC
is principally involved in the financing and leasing of plant, vehicles and equipment, mainly for small and medium sized businesses, as well as
investment products.

Global Wealth
The Global Wealth division comprises Funds Management, Insurance and Private Wealth business units which provide investment, superannuation,
insurance and private banking solutions to customers across the Asia-Pacific region to make it easier for them to connect with, protect and grow theirwealth.

•Private Wealth includes global private banking business which specialises in assisting individuals and families to manage, grow and preserve theirwealth.

•Funds Management includes the Pensions and Investment business and E*TRADE.

•

Insurance includes Life Insurance, General Insurance and ANZ Lenders Mortgage Insurance.

•

Corporate and Other includes income from invested capital and profits from the Advice and Distribution business.

Global Technology, Services & Operations and Group Centre
GTSO and Group Centre provide support to the operating divisions, including technology, operations, shared services, property, risk management,
financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes Group Treasury and Shareholder
Functions.

Settlement balances owed to / from ANZ represent financial assets and/or liabilities which are in the course of being settled. These may include trade
dated assets and liabilities, nostro / vostro accounts and settlement accounts.

143

ASX APPENDIX 4D – CROSS REFERENCE INDEX

Page
Details of the reporting period (4D Item 1) ................................................................................................................................................... Table of Contents
Results for Announcement to the Market (4D Item 2) ..................................................................................................................................... After front cover
Net Tangible Assets per security (4D Item 3) ....................................................................................................................................................................... 12
Details of entities over which control has been gained or lost (4D Item 4) ......................................................................................................................... 122
Dividends and dividend dates (4D Item 5) ...................................................................................................................................................... After front cover
Dividend Reinvestment Plan (4D Item 6) ........................................................................................................................................................ After front cover
Details of associates and joint venture entities (4D Item 7) ................................................................................................................................................ 122

144

ALPHABETICAL INDEXPAGEAppendix 4D Statement ......................................................................................................................................................................................................... 2
Appendix 4D Cross Reference Index ................................................................................................................................................................................. 144
Auditor’s Review Report and Independence Declaration ................................................................................................................................................... 125
Basis of Preparation ........................................................................................................................................................................................................... 100
CEO Overview ..................................................................................................................................................................................................................... 17
CFO Overview...................................................................................................................................................................................................................... 19
Changes in Composition of the Group ............................................................................................................................................................................... 122
Condensed Consolidated Balance Sheet ............................................................................................................................................................................. 97
Condensed Consolidated Cash Flow Statement .................................................................................................................................................................. 98
Condensed Consolidated Income Statement ....................................................................................................................................................................... 95
Condensed Consolidated Statement of Comprehensive Income ......................................................................................................................................... 96
Condensed Statement of Changes in Equity........................................................................................................................................................................ 99
Contingent Liabilities and Contingent Assets ..................................................................................................................................................................... 122
Credit Quality ..................................................................................................................................................................................................................... 108
Definitions .......................................................................................................................................................................................................................... 141
Deposits and Other Borrowings ......................................................................................................................................................................................... 110
Directors’ Declaration ......................................................................................................................................................................................................... 124
Directors’ Report .................................................................................................................................................................................................................. 94
Dividends ........................................................................................................................................................................................................................... 104
Earnings Per Share ............................................................................................................................................................................................................ 105
Fair Value Measurement .................................................................................................................................................................................................... 114
Geographic Review .............................................................................................................................................................................................................. 77
Income ............................................................................................................................................................................................................................... 101
Income Tax Expense ......................................................................................................................................................................................................... 103
Investments In Associates.................................................................................................................................................................................................. 122
Media Release ....................................................................................................................................................................................................................... 5
Net Loans and Advances ................................................................................................................................................................................................... 106
Note to the Cash Flow Statement ...................................................................................................................................................................................... 121
Operating Expenses........................................................................................................................................................................................................... 102
Profit Reconciliation ............................................................................................................................................................................................................. 85
Provision for Credit Impairment .......................................................................................................................................................................................... 107
Related Party Disclosures .................................................................................................................................................................................................. 123
Segment Analysis .............................................................................................................................................................................................................. 119
Segment Review .................................................................................................................................................................................................................. 47
Share Capital ..................................................................................................................................................................................................................... 112
Shareholders’ Equity .......................................................................................................................................................................................................... 112
Significant Events Since Balance Date .............................................................................................................................................................................. 123
Snapshot ................................................................................................................................................................................................................................ 9
Subordinated Debt ............................................................................................................................................................................................................. 111
Supplementary Information – Average Balance Sheet and Related Interest ..................................................................................................................... 132
Supplementary Information – Capital Management ........................................................................................................................................................... 128
Supplementary Information – Derivative Financial Instruments ......................................................................................................................................... 137
Supplementary Information – Exchange Rates .................................................................................................................................................................. 135
Supplementary Information – Full Time Equivalent Staff ................................................................................................................................................... 135
Supplementary Information – Funds Management and Insurance Income Reconciliation ................................................................................................. 136
Supplementary Information – Summary of Principal Risks and Uncertainties .................................................................................................................... 139

145

ALPHABETICAL INDEXThis page has been left blank intentionally146